a. What is the implied Peso borrowing rate when you convert a US$ loan into a lo

Question

a. What is the implied Peso borrowing rate when you convert a US$ loan into a loan on Mexican Pesos?

b. What transactions would you need to execute in order to convert a US$ loan into a 6-month loan on 10,000,000 Mexican Pesos?

(5) You have a LINE OF CREDIT is 13 P/$ and the 6-month forward rate is 13.25 P/$. All interest rates are quoted on an annual basis. a. What is the implied Peso borrowing rate when you convert a US$ loan into a loan on Mexican Pesos? b. What transactions would you need to execute in order to convert a US$ loan into a 6-month loan on 10,000,000 Mexican Pesos? of America. You need to borrow 10,000,000 Mexican Pesos for six months. The spot FX RATEarrow-10x10.png for $1,000,000 at 4% for six months from BANK

Explanation / Answer

Hello Pal,

First of all a very nice as well as intersting question from your side.

So now straight to the question, as asked above with all the information available from your side and from mine, the answer is as under:

Q.1 Peso borrowing rate, here, wil be 6.73%.

Q.2 The transections will be considered as currency swap, and it will go like this:

That is all I can say from the above given information by you, hope have solved your problem to some extent.

Regards.

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