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Predict the rate of exchange one year

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Reference no: EM132502700

Respirators Inc., is a U.S. company that has decided to expand its operations into Mexico. The company intends to manufacture ventilators for distribution in Mexico. Respirators Inc. has located a site for a

Mexican factory in Mexico City. The cost to purchase and equip the factory is Mexican peso 8,000,000.

Spot rate is 1 USD = 20.23 Peso

Current interest rates in US is 2.5% and in Mexico is 8% with inflation in the US of 2.7% and Mexico of 5.5%.

Based on the interest rate parity theory, predict the rate of exchange one year from now for 1US$ = ? peso

Reference no: EM132502700

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