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You expect that the Mexican peso will appreciate against the Australian dollar from its spot rate of A$0.2004 to A$0.2673 in one year. The following
You expect that the Mexican peso will appreciate against the Australian dollar from its spot rate of A$0.2004 to A$0.2673 in one year. The following interbank lending and borrowing rates exist:
Lending Rate | Borrowing Rate | |
Australian dollar | 7.86% | 8.75% |
Mexican peso | 8.28% | 9.45% |
You have a borrowing capacity of either 1 million Australian dollars or 5 million Mexican pesos in the interbank market. Without using your own deposited fund, estimate the profits in percentage. (enter 2 decimal places number with no sign or symbol)
Please show detailed workings to get the answer. (Answer: 35.68)
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