What is spot rate of a mexican peso in australian dollars, Financial Management

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What is spot rate of a mexican peso in australian dollars

Cross Rate and Forward Rate

Response to the following problem:

Biscayne Co. will be receiving Mexican pesos today and will need to convert them into Australian dollars. Today, a U.S. dollar can be exchanged for 10 Mexican pesos. An Australian dollar is worth one-half of a U.S. dollar.

a. What is the spot rate of a Mexican peso in Australian dollars?

b. Assume that interest rate parity exists and that the annual risk-free interest rate in the United States, Australia, and Mexico is 7 percent. What is the 1-year forward rate of a Mexican peso in Australian dollars?

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