Suppose that the nominal interest rate in Brazil is $11\%$ and the nominal interest rate in

Mexico is $7\mathrm{.}5\%.$ If the current exchange rate is $5\mathrm{.}60MxN=1BRL.$ Which of the following is

predicted by the International Fisher Effect?

The Brazilian real is expected to appreciate about $3\mathrm{.}5\%$ against the Mexican peso.

The exchange rate in $1$ year is expected to be approximately $5\mathrm{.}40MxN=1BRL.$

the exchange rate in $1$ year is expected to be approximately $5\mathrm{.}635MxN=1BRL$

None of the other answers are correct.

The Mexican peso is expected to depreciate by about $3\mathrm{.}5\%$ against the BRL over the next year.