Determine the yield to an investor from mexico

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Reference no: EM132700021

Problem 1: Today, the one-year U.S. interest rate is 2%, while the one-year interest rate in Mexico is 6%. The spot rate of the Mexico peso (MXP) is $.046 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.

Reference no: EM132700021

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