Q. The 2-year interest rate in Mexico is 7%, and the 2-year interest rate in the United States is 4%. The Mexican Peso is trading at 18.75 per 1 US Dollar today (spot). If the 2 year forward Mexican peso exchange rate is 16.00 Pesos per 1 USD, what would you do to arbitrage this differential? 4. Assuming $1,000,000 investment, what would your profit on this arbitrage be?

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