You need to decide whether to invest (or deposit) your funds in the U.S or in Mexico. You are looking for a riskless investment activity. Your horizon is exactly 9 months. You have exactly $65,000.00 and your final position is to end in USD. The following data are made available to you. Note: You are neither a banker nor an FX dealer. You take the rates and figures in the market as they are given to you. Spot rate: Buy rate MXN 19.235/USD; Spot rate: Sell rate MXN 19.385/USD Nine-month forward rate: Buy rate MXN 20.115/USD Nine-month forward rate: Sell rate MXN 20.265/USD U.S commercial interest rate (borrowing or lending) 4.5 percent Mexico commercial interest rate (borrowing or lending) 6.5 percent Review the following questions. When you are ready, enter your responses on Canvas (in the tab Quizzes, WA05). Thank you.

1. It is more profitable to deposit this fund in: a. The U.S. b. Mexico. c. It is equally the same. 2. Considering both countries, the estimated additional gain is (drop $ sign in your answer): Hint: You are asked to make a profit. 3. These two markets are in equilibrium, Indicate Agree or Disagree 4. If you reverse your strategy, your gain or loss in USD will be (drop $ sign in your answer and if it is a loss, indicate it by negative sign in your answer). 5. Carry trade involves borrowing in low interest currencies and investing the funds in high interest currencies. Agree, disagree. 6. In a global environment, the statement of the interest rate is 6 percent: a. Does not make much sense. b. Needs a more accurate statement that identifies the currency. c. Is deficient since interest rates are currency related. d. All answers in this question are correct.