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2. (5 Points) Assume that the spot exchange rate for Mexican pesos is $0.0914. If US has 2.8% inflation over the coming year and Mexico

2. (5 Points) Assume that the spot exchange rate for Mexican pesos is $0.0914. If US has 2.8% inflation over the coming year and Mexico has 1.1% inflation, what is the predicted exchange rate for Mexican pesos a year from now according to PPP? Explain/show your work.

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