Currently, the USD/MXN rate is 19.5300 and the three-month forward exchange rate is 20.8400. The three-month interest rate is 3.3% per annum in the U.S. and 6.3% per annum in Mexico. Assume that you can borrow MXP10,000,000 or its equivalent in USD. How much do you make/lose if you borrow locally and invest abroad? (USD, no cents)
Currently, the USD/MXN rate is 19.5300 and the three-month forward exchange rate is 20.8400. The three-month interest rate is 3.3% per annum in the U.S. and 6.3% per annum in Mexico. Assume that you can borrow MXP10,000,000 or its equivalent in USD. How much do you make/lose if you borrow locally and invest abroad? (USD, no cents)
Chapter22: International Financial Management
Section: Chapter Questions
Problem 8P
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Currently, the USD/MXN rate is 19.5300 and the three-month forward exchange rate is 20.8400. The three-month interest rate is 3.3% per annum in the U.S. and 6.3% per annum in Mexico. Assume that you can borrow MXP10,000,000 or its equivalent in USD. How much do you make/lose if you borrow locally and invest abroad? (USD, no cents)
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