Question: Table #1 Amount $3,000,000 7% US interest rate Mexico interest rate 4% Spot rate Ps 19.6512/$ 90-day Forward Rate Ps 192131/$ Investment for 90 days
Table #1 Amount $3,000,000 7% US interest rate Mexico interest rate 4% Spot rate Ps 19.6512/$ 90-day Forward Rate Ps 192131/$ Investment for 90 days a. By using data from Table what currency do you need to invest to generate arbitrage profit, according to the rule of thumb? b. By using data from Table, find the total proceeds (principal + interest income) of the investment for 90 days in the currency according to the rule of thumb (this is the amount that you will sell forward), c. By using data from Table, find the total opportunity cost of capital (Hint find proceeds of 90 day investment in a second currency principal + interest income) d. By using data from Tablel find the CIA profit (after accounting for the opportunity cost of capital, do not round intermediate calculations, Round your final answer to the nearest US dollar)
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