The Spot Exchange Rate for the Mexican Peso Is 0

question 46

Multiple Choice

The spot exchange rate for the Mexican peso is 0.114 CAD/MXN,and the one-year forward rate is 0.104 CAD/MXN.If the one-year Canadian interest rate is 3.5% and the one-year Mexican interest rate is 9.0%,what is the credit spread on Mexican one-year bonds?

• A)4.5%
• B)5.5%
• C)1%
• D)3.5%
• E)5%

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