Please explain the concepts of expected value of effective yield between Mexican Pesos (MXN) and USD, define the relationship between two currencies, and analyze the following scenario:

Pittsburgh Co. plans to invest its excess cash in MXN for one year. The one-yearshort-term interest rate on Mexican government treasuries is 19 percent. The probability of the Peso's percentage change in value during the next year is shown in Table 4:

Table 4

Probability Distribution of MXN against USD

POSSIBLE RATE OF CHANGE IN THE MEXICAN PESO (MXN) OVER THE LIFE INVESTMENT

PROBABILITY OF OCCENCE

(15 %)

20 %

(4 %)

50 %

0 %

30 %

What is the expected value of the effective yield based on this information?

Given that the U.S. interest rate for one year is 7 %, what is the probability that a one-year investment in pesos will generate a lower effective yield than could be generated if Pittsburgh Co. simply invested domestically? Please verify if the probability distribution given in Table 4 is consistent with interest rate parity.