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

Today, the one-year U.S. interest rate is 2%, while the one-year interest 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) to an investor from Mexico who engages in covered interest arbitrage.

Expert Solution

jeff jeffy answered 9 months ago

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