Grupo$$ Bimbo, headquartered in Mexico$$ City, is one of the largest bakery companies in the world. On January$1$st$,$ when the spot exchange rate is MXN$10\mathrm{.}79=$ USD$1\mathrm{.}00,$ the company borrows USD$25\mathrm{.}3$ million from a New York bank for one year at $6\mathrm{.}84\%$ interest$($Mexican banks had quoted $9\mathrm{.}59\%$ for an equivalent loan in Mexican$$ pesos$).$ During the$$ year, U$.$S$.$ inflation is $2\mathrm{.}8\%$ and Mexican inflation is $4\mathrm{.}2\%.$ At the end of the year the firm repays the dollar loan.

a$.$ If Bimbo expected the spot rate at the end of one year to be that equal to purchasing power$$ parity, what would be the cost to Bimbo of its dollar loan in$$ peso$-$denominated interest?

b$.$ What is the real interest cost$($adjusted for$$ inflation$)$ to$$ Bimbo, in$$ peso$-$denominated terms, of borrowing the dollars for one$$ year, again assuming purchasing power$$ parity?

c$.$ If the actual spot rate at the end of the year turned out to be MXN$9\mathrm{.}62=$ USD$1\mathrm{.}00,$ what was the actual$$ peso$-$denominated interest cost of the$$ loan?

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Part $1$

a$.$ If Bimbo expected the spot rate at the end of one year to be that equal to purchasing power$$ parity, what would be the cost to Bimbo of its dollar loan in$$ peso$-$denominated interest?

If Bimbo expected the spot rate at the end of one year to be equal to purchasing power$$ parity, the cost to Bimbo of its dollar loan in$$ peso$-$denominated interest is

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