Question: Given expected 1-year inflation rate in U.S is 2% while that for Mexico is 10%, and the spot exchange rate is 20 MXP for 1

Given expected 1-year inflation rate in U.S is 2% while that for Mexico is 10%, and the spot exchange rate is 20 MXP for 1 USD. What is the expected spot exchange rate between MXP and USD in 1-year time?

A. 21.5686 USD/MXP

B. 18.4313 USD/MXP

C. 21.5686 MXP/USD

D. 18.4313 MXP/USD

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