TRIDENT, Inc.

Current spot rate: $ $0\mathrm{.}0495/$MP $($MP $=$ Mexican Peso$)$

$180-$day forward rate: $$\frac{0\mathrm{.}0500}{M}P$

$180-$day inflation rate in the US $=8\%$

$180-$day inflation rate in Mexico $=15\%$

Forecast of the $180-$day rate from agency $1$:$$\frac{0\mathrm{.}1800}{M}P$

Forecast of the $180-$day rate from agency $2$: $$\frac{0\mathrm{.}1025}{M}P$

Forecast of the $180-$day rate from agency $3$: $$0\mathrm{.}0515/$MP

Forecast of the $180-$day rate from agency $4$: $ $0\mathrm{.}0492/$MP

Forecast of the $180-$day rate from agency $5$: $$\frac{0\mathrm{.}0399}{M}P$

Forecast of the $180-$day rate from agency $6$: $$\frac{0\mathrm{.}0486}{M}P$

The actual spot rate $180$ days from now: $$\frac{0\mathrm{.}0899}{M}P$

Part a$)$: Can you rank the agencies in terms of their forecasting expertise? Make sure that you show all your workings for full credit. Provide a brief executive summary to be delivered to your CEO.

Part b$).$ What if the forward rate was biased and you had to use PPP rates to determine the synthetic forward? Calculate the new rankings based on this new information.

Detailed calculations only will yield full credit. One write$-$up per group. Submit via the assignment page on canvas.