Suppose that the Mexican peso (MXN) is pegged to the U.S. dollar (USD). You think...
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Suppose that the Mexican peso (MXN) is pegged to the U.S. dollar (USD). You think that there is a 10% probability that the MXN wil appreciate relative to USD by 1% over the course of the next month, there is a 15% probability that the MXN will appreciate relative to USD by 1.5% over the course of the next month, and there is a 75% probability that the MXN will remain pegged to the U.S. dollar. What interest differential per annum would prevent you from speculating by borrowing MXN and lending USD?O US. interest rate minus Mexican interest rate is less than 4.2% per annumO US. interest rate minus Mexican interest rate is greater than 3.9% per annumO None of the given interest differentials can prevent the speculation by borrowing MXN and lending USDO U.S. interest rate minus Mexican interest rate is less than 3.9% per annumO U.S. interest rate minus Mexican interest rate is greater than 4.2% per annum
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