The six-month interest rate in the United States is 10 percent; in Mexico it is 12 percent.

Question:

The six-month interest rate in the United States is 10 percent; in Mexico it is 12 percent. The current spot rate (dollars per peso) is $0.40.
a. What do you expect the six-month forward rate to be?
b. Is the peso selling at a premium or discount?
c. If the expected spot rate in six months is $0.38, what is the risk premium?