Question Details

Explain how such expectations could have affected U.S. interest rates



1.	Covered Interest Arbitrage. Assume the following information:

	Spot rate of Mexican peso	= $.100
	180 day forward rate of Mexican peso	= $.098
	180 day Mexican interest rate	= 6%
	180 day U.S. interest rate	= 5%

	Given this information, is covered interest arbitrage worth¬while for Mexican investors who have pesos to invest?  Explain your answer.

2. 	Effects of September 11. The terrorist attack on the U.S. on September 11, 2001 caused expectations of a weaker U.S. economy.  Explain how such expectations could have affected U.S. interest rates, and therefore have affected the forward rate premium (or discount) on various foreign currencies. 

Business Management Assignment Help, Business Management Homework help, Business Management Study Help, Business Management Course Help