Assume that the Mexican peso currently trades at 15 pesos to theU.S. dollar. During the year U.S. inflation is expected to average3%, while Mexican inflation is expected to average 4%. What is thecurrent value of one peso in terms of U.S. dollars? Given therelative inflation rates, what will the exchange rates be 1year from now? Which currency is expected toappreciate and which currency is expected todepreciate over the next year?

A) The current value of one Mexican peso in terms of U.S. dollars, US$, is US$______/MP. (Round to six decimal places.)

B) Given the relative inflation rates, the exchange rate of oneU.S. dollar in terms of Mexican pesos, MP, one year from now willbe MP ______/US$. (Round to six decimal places.)

C) Given the relative inflation rates, the exchange rate of oneMexican peso in terms of U.S. dollars, US$, one year from now willbe US$________/MP. (Round to six decimal places.)

D) The US Dollar/Mexican Peso is expectedto appreciate, while the US Dollar/MexicanPeso is expected to depreciate over the next year.(Select US Dollar OR Mexican Peso)