The US risk-free rate is 8% and the Mexico rate is 7%. The spot and 10-month forward exchange rates are 20.9 and 19.9 peso/$, respectively. Find the covered interest arbitrage profit (expressed in $) you'll make in10 months if you can borrow either $1M or its equivalent in pesos?

Answer rating: 100% (QA)

To calculate the covered interest arbitrage profit we need to compare the returns from two investmen... View the full answer