1. Assume that Mexican interest rates are substantially higher than U.S. interest rates. If interest rate parity condition holds, do you think hedging with a forward rate will be beneficial if the spot rate of the peso is expected to decline over time?
2. A bank is considering an investment in a municipal security that offers a yield of 8 percent. What is this security’s equivalent pre-tax yield if the bank’s tax rate is 25 percent? (Round your answer to 2 decimal places. (e.g., 32.16))