Youre a FX trader working in Mexico. You have decided not to bear transaction foreign...
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Youre a FX trader working in Mexico. You have decided not to bear transaction foreign exchange risk. The required information is as follows:
|
| Bid | Ask |
| Spot rate (MXN/) | 29.202 | 29.230 |
| 180-day Forward rate (MXN/) | 28.956 | 28.982 |
| Peso interest rate % p.a. | 1.00 | 1.06 |
| Pound interest rate % p.a. | 4.04 | 4.10 |
Required:
a. You are considering two alternative investments of MXN 10,000 in the 180-day Mexican peso deposits or 180-day U.K. pound deposits. Calculate the MXN return for both deposits (domestic vs. foreign money market). You must show your workings with a step-by-step approach. (4 marks)
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