Solved: Interest arbitrage worthwhile for mexican investors, Finance Basics

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Interest arbitrage worthwhile for mexican investors

Problem:

Assume the following information:

Spot rate of Mexican peso =$.100
180 day forward rate of Mexican peso = $.098
180 day Mexican interest rate = 6%
180 day U.S. interest rate=5%

Given this information, is covered interest arbitrage worthwhile for Mexican investors who have pesos to invest? Explain the answer.

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Finance Basics: Interest arbitrage worthwhile for mexican investors

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Finance Basics: Interest arbitrage worthwhile for mexican investors

Reference No:- TGS02038492

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