Question: Please consider the information below and then answer the following question. Current spot rate (Argentine Peso=ARS) ARS 14.16/$ Three month forward rate ARS 14.22/$ Annual

Please consider the information below and then answer the following question.

Current spot rate (Argentine Peso=ARS) ARS 14.16/$

Three month forward rate ARS 14.22/$

Annual U.S. interest rate 1.5 percent

Annual Argentine interest rate 5.6 percent

Annual U.S. inflation rate 2.0 percent

The expected next year's forecast of ARS, based on purchasing power parity, is: Choose from the options below

a. Depreciation of ARS about 4.1 percent

b. Appreciation of ARS about 4.8 percent

c. Depreciation of ARS about 5.6 percent

d. Appreciation of ARS about 2.0 percent

e. Appreciation of ARS about 2.8 percent

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