QUESTION05: Suppose you are using fundamental forecasting to predict the exchange rate of the Mexican peso. You note that Mexicos interest rates are high and Mexican inflation should remain low. Based on this observation, you can forecast that the pesos value will _______ as U.S. investors capitalize on the high interest rates by investing in Mexican securities.

fall

rise

QUESTION06: Suppose you are using market-based forecasting to predict the exchange rate of the Mexican peso. You note that the pesos forward rate exhibits a significant discount. Based on the forward rate, which provides a forecast of the future spot rate, the pesos value will _______.

fall

rise