Financial Risk Manager Part 1

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Explanation:

Using covered interest parity / IRP for a FX quote of USD per MXN:

F_0 = S_0 e^{(r_{USD} - r_{MXN})T}

So,

\frac{F_0}{S_0}=e^{(r_{USD}-r_{MXN})T}

Given:

r_{USD}-r_{MXN} = \frac{\ln(0.0490/0.0500)}{0.25} \approx \frac{\ln(0.98)}{0.25} \approx -0.0808

Thus:

r_{MXN}-r_{USD} \approx +8.08\% \text{ per annum}

So the Mexican short-term interest rate is about 8.08% higher than the U.S. rate.

Explanation:

Using covered interest parity / IRP for a FX quote of USD per MXN:

F_0 = S_0 e^{(r_{USD} - r_{MXN})T}

So,

\frac{F_0}{S_0}=e^{(r_{USD}-r_{MXN})T}

Given:

r_{USD}-r_{MXN} = \frac{\ln(0.0490/0.0500)}{0.25} \approx \frac{\ln(0.98)}{0.25} \approx -0.0808

Thus:

r_{MXN}-r_{USD} \approx +8.08\% \text{ per annum}

So the Mexican short-term interest rate is about 8.08% higher than the U.S. rate.

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Last updated: April 18, 2026 at 11:32

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