Question $25(4$ points$)$

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Annual inflation rates in the US and Mexico are expected to be $6\%$ and $20\%$ respectively, over the next year. If the current exchange rate is $$\frac{0\mathrm{.}005}{P}s$ and PPP holds, what is the expected exchange rate at the end of next year?

$$\frac{0\mathrm{.}006}{?}$ Ps

$$\frac{0\mathrm{.}005}{P}s$

$$\frac{0\mathrm{.}002}{P}s$

$$\frac{0\mathrm{.}004}{P}s$