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The USD inflation rate is 2.7%. The Mexican inflation rate is 2.6%. If the spot rate...

The USD inflation rate is 2.7%. The Mexican inflation rate is 2.6%. If the spot rate one year ago was $0.050 per peso, what would we expect it to be today?

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Answer #1

In the case, inflation rates of US and Mexico, and spot exchange rate of last year is given.

All calculations are shown in the below image.

Dowel na some According to Relative purchasing power : parity, HIB Where, et - Inflation adjusted spot rate (exchange rate. c

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