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Estimate the profits in percentage

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You expect that the Mexican peso will depreciate against the Australian dollar from its spot rate of A$0.2578 to A$0.2226 in one year. The following interbank lending and borrowing rates exist:

                                       Lending Rate               Borrowing Rate
Australian dollar            7.97%                          8.79%
Mexican peso               8.05%                            9.32%

Problem 1: You have a borrowing capacity of either 2 million Australian dollars or 5 million Mexican pesos in the interbank market. Without using your own deposited fund, estimate the profits in percentage.

Reference no: EM132654501

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