Currently, the USD/MXN rate is 19.7800 and the six-month forward exchange rate is 20.1700. The six-month interest rate is 4.9% per annum in the U.S. and 6.2% 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 the foreign currency and invest locally? (USD, no cents)

Currently, the USD/MXN rate is 19.7800 and the six-month forward exchange rate is 20.1700. The six-month interest rate is 4.9% per annum in the U.S. and 6.2% 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 the foreign currency and invest locally? (USD, no cents)

International Financial Management

14th Edition

ISBN:9780357130698

Author:Madura

Publisher:Madura

Chapter21: International Cash Management

Section: Chapter Questions

Problem 4ST

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