Intro The annual risk-free interest rate is 8% in the U.S. and 6% in Mexico. The...

 

Transcribed Image Text:

Intro The annual risk-free interest rate is 8% in the U.S. and 6% in Mexico. The spot rate is $0.052 per peso and the one-year forward rate is $0.054 per peso. Part 1 Attempt 1/5 for 10 pts. Who can profit from covered interest arbitrage, and how? Ignore taxes and transaction costs. No one can profit from covered interest arbitrage. U.S. investors can profit by buying pesos and investing in Mexico. U.S. investors can profit by selling pesos and investing in the U.S.. Mexican investors can profit by selling dollars and investing in Mexico. Mexican investors can profit by buying dollars and investing in the U.S.. Submit Intro The annual risk-free interest rate is 8% in the U.S. and 6% in Mexico. The spot rate is $0.052 per peso and the one-year forward rate is $0.054 per peso. Part 1 Attempt 1/5 for 10 pts. Who can profit from covered interest arbitrage, and how? Ignore taxes and transaction costs. No one can profit from covered interest arbitrage. U.S. investors can profit by buying pesos and investing in Mexico. U.S. investors can profit by selling pesos and investing in the U.S.. Mexican investors can profit by selling dollars and investing in Mexico. Mexican investors can profit by buying dollars and investing in the U.S.. Submit

Answer rating: 100% (QA)

In this scenario US investors can profit from covered interest ar... View the full answer