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Consider the following hypothetical facts about Mexico: The peso recently lost over 40% of its value relative to the dollar. Over the course of the next 90 days, the Mexican government risks losing control of the economy. If it does, the Mexican peso will lose 33% of its value relative to the U.S. dollar, and the Mexican stock market will fall by 39%. There is a 35% chance that the authorities will lose control of the economy. Alternatively, the U.S. Congress may vote to help Mexico by offering collateral for Mexican government loans. In that case, the Mexican peso will gain 27% in value relative to the U.S. dollar, and the Mexican stock market will rise by 29%. As a U.S. investor with no current assets or liabilities in Mexico, you have decided to speculate. find out your expected dollar return from investing dollars in the Mexican stock market for the next 90 days.

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M941490

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