Mr liam want to invest Us$700,000 on mexico. interest rate per year inflation rate per year US 1.49% 1.27% Mexico 6.47% 3.38% Nominal Exchange Rates -Spot 19.780 Pesos=US $1 -One-year forward 19.790 Pesos=US $1 The future spot exchange rate(St) is 19.650 Pesos=US $1. Calculate the arbitrage portfolio and assess how to construct the arbitrage portfolio based on the calculations.
Mr liam want to invest Us$700,000 on mexico. interest rate per year inflation rate per year US 1.49% 1.27% Mexico 6.47% 3.38% Nominal Exchange Rates -Spot 19.780 Pesos=US $1 -One-year forward 19.790 Pesos=US $1 The future spot exchange rate(St) is 19.650 Pesos=US $1. Calculate the arbitrage portfolio and assess how to construct the arbitrage portfolio based on the calculations.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Mr liam want to invest Us$700,000 on mexico.
|
interest rate per year |
inflation rate per year |
|
|
US |
1.49% |
1.27% |
|
Mexico |
6.47% |
3.38% |
Nominal Exchange Rates
-Spot 19.780 Pesos=US $1
-One-year forward 19.790 Pesos=US $1
The future spot exchange rate(St) is 19.650 Pesos=US $1.
Calculate the arbitrage portfolio and assess how to construct the arbitrage portfolio based on the calculations.
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