Use the following information to answer the next two questions.

An investment banker in Spain notices that 1 year interest rates in Spain and Mexico are 8% and 12%, respectively. Current spot rates are as follows:

1.02/$, $.15/MP

The one year forward rate is .18/MP and the expected spot rate one year from now is .14/MP.

What should the forward premium be for IRP to hold?

		.037
		-.0357
		.04
		-.04

QUESTION 4

Find the uncovered rate of return from Spain's point of view if the banker's expectation of the future exchange rate is accurate.

		.0248
		.0279
		.035
		-.0118