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Approximate five-year forecast

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Assume that interest rate parity holds. The US five-year interest rate is 5% annualized, and the Mexican five-year rate is 8% annualized. Today's spot rate of the Mexican peso is $.20. What is the approximate five-year forecast of the peso's spot rate if the five-year forward rate is used as forecast?

a. $.131

b. $.226

c. $.262

d. $.140

e. $.174

Reference no: EM131089352

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