Question: Using the uncovered interest parity , if the return on United States dollar deposits ( i $ ) is 0.5%, the expected dollar-peso exchange rate
Using the uncovered interest parity, if the return on United States dollar deposits (i$) is 0.5%, the expected dollar-peso exchange rate (Ee$/MP) is $0.04 per peso, and dollar-peso spot rate(E$/MP) is $0.05, what is the return on peso deposits (iMP)?
(Hint: When you're doing the calculations, convert the peso interest rate into a decimal [i.e., 0.005]. Once you have your answer, convert it back to a percentage.)
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