Use the following information to answer the next two questions.

A Japanese investor notices the expected one year inflation rate in Japan and Mexico is 5% and 7%, respectively. The current spot rates for yen and pesos are as follows:

$.15/MP, JY111.11/$

What should be the value of pesos in terms of yen at the end of the year according to relative PPP?

		16.9842
		.0589
		16.355
		.0611

Suppose the spot rate at the end of the year is MP.07/JY. Has the yen appreciated or depreciated in real terms?

Appreciated

Depreciated

Neither appreciated or depreciated

Cannot be determined