Please check the problem in additional materials and answer the questions:
What is the expected value of the effective yield based on this information?
Given that the U.S. interest rate for one year is 7 %, what is the probability that a one-year investment in pesos will generate a lower effective yield than could be generated if Pittsburgh Co. simply invested domestically? Please verify if the probability distribution given in Table 4 is consistent with interest rate parity.
What is the expected value of the effective yield based on this information?
October 11, 2022