Multiple Choice
Suppose that the forward rate of Mexican pesos per dollar is selling flat,with both the spot and forward rates trading at 15 pesos per dollar.If the relevant interest rates for a foreign exchange speculator are 3 percent on dollars and 13 percent in pesos,a potential arbitrage operation would involve
A) selling pesos in the forward market.
B) buying pesos in the forward market.
C) borrowing pesos now.
D) All of the above.
Correct Answer:
Verified
Correct Answer:
Verified
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