Investment implications of irp and ife

Reference no: EM131043298

Investment Implications of IRP and IFE The Argentine 1-year CD (deposit) rate is 13 percent, while the Mexican 1-year CD rate is 11 percent and the U.S. 1-year CD rate is 6 percent. All CDs have zero default risk. Interest rate parity holds, and you believe that the international Fisher effect holds.

Jamie (based in the United States) invests in a 1-year CD in ArgentinaC
Ann (based in the United States) invests in a 1-year CD in Mexico
Ken (based in the United States) invests in a 1-year CD in Argentina and sells Argentine pesos 1 year forward to cover his position
Juan (who lives in Argentina) invests in a 1-year CD in the United States
Maria (who lives in Mexico) invests in a 1-year CD in the United States
Nina (who lives in Mexico) invests in a 1-year CD in Argentina.

Carmen (who lives in Argentina) invests in a 1-year CD in Mexico and sells Mexican pesos 1 year forward to cover her position

Corio (who lives in Mexico) invests in a 1-year CD in Argentina and sells Argentine pesos 1 year forward to cover his position.

Based on this information and assuming the international Fisher effect holds, which person will be expected to earn the highest return on the funds invested? If you believe that multiple persons will tie for the highest expected return, name each of them. Explain.

Reference no: EM131043298

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