Suppose the 1-Year Risk-Free Rate of Return in the U

question 7

Multiple Choice

Suppose the 1-year risk-free rate of return in the U.S. is 2% and the 1-year risk-free rate of return in Mexico is 8%. The current exchange rate is 1 peso = U.S. $.051. A 1-year future exchange rate of ________ for the peso would make a U.S. investor indifferent between investing in the U.S. security and investing in the Mexican security.

• A) 1.6037
• B) 0.02001
• C) 1.7500
• D) 0.02300
• E) 0.01250

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Definitions:

Agriculture

The science, art, and practice of cultivating the soil, growing crops, and raising livestock for human use and consumption.

Municipalities

Local government entities that are responsible for providing basic services and governance within a specified geographic area or city.

Mining

The process of extracting minerals, metals, and other valuable materials from the earth through various techniques.

Industrial Ecology

An interdisciplinary field focusing on sustainable industrial practices, aiming to reduce waste and efficiently use resources through ecosystem-inspired approaches.