Question
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.
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 percentMexico 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.
2.Considering both countries, the estimated additional gain is (drop $ sign in your answer): Hint: You are asked to make a profit.
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).
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started