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Assume that Interest Rate Parity holds; the 5-year interest rate in the U.S. on A-rated corporate bonds is 5% per year, and the corresponding interest
Assume that Interest Rate Parity holds; the 5-year interest rate in the U.S. on A-rated corporate bonds is 5% per year, and the corresponding interest rate on Mexican A-rated corporate bonds is 8% per year. Assume that the current spot FX rate for ($/MXN)=0.2000, where MXN is the Mexican Peso, what is the approximate 5-year forecast of the MXN peso future spot rate 5 years from today?
a. $0.1944/MXN b. $0.1737/MXN c. $0.2057/MXN d. $0.2302/MXN
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