The one-year risk-free rate in the U.S. is 4.340 percent and the one-year risk-free rate in Mexico is 6.64 percent. The one-year forward rate between the Mexican peso and the U.S. dollar is MXN12.366/$. What is the spot exchange rate? Assume interest rate parity holds.     Multiple Choice MXN13.969/$ MXN14.939/$ MXN12.366/$ MXN12.639/$ MXN12.099/$

Essentials Of Investments
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ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
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The one-year risk-free rate in the U.S. is 4.340 percent and the one-year risk-free rate in Mexico is 6.64 percent. The one-year forward rate between the Mexican peso and the U.S. dollar is MXN12.366/$. What is the spot exchange rate? Assume interest rate parity holds.

 

 

Multiple Choice
  • MXN13.969/$

  • MXN14.939/$

  • MXN12.366/$

  • MXN12.639/$

  • MXN12.099/$

Expert Solution
Step 1

STEP 1

Financial institutions, such as banks, can provide forward exchange rates between two nations for a variety of time periods.

You can get the spot exchange rates from foreign currency markets or financial organizations. These organizations are also excellent sources for past spot rates.

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