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Today, the one-year U.S. interest rate is 2%, while the one-year interest rate in Mexico is...

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Finance

Today, the one-year U.S. interest rate is 2%, while the one-yearinterest rate in Mexico is 8%. The spot rate of the Mexico peso(MXP) is $.06 The one-year forward rate of the MXP exhibits a 10%discount. Determine the yield (percentage return on investment) toan investor from Mexico who engages in covered interestarbitrage.

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Today, the one-year U.S. interest rate is 2%, while the one-yearinterest rate in Mexico is 8%. The spot rate of the Mexico peso(MXP) is $.06 The one-year forward rate of the MXP exhibits a 10%discount. Determine the yield (percentage return on investment) toan investor from Mexico who engages in covered interestarbitrage.

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