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What is the total amount of pesos

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Problem: Serena lives in Buenos Aires and is planning to visit the Machu Picchu in Peru for her summer vacation. The trip will take place in 3 months and is expected to cost 30,000 Peruvian New Sol. The current exchange rate between the dollar and the peso is 7.80 ARS/USD whereas the exchange rate between the dollar and the sol is 2.76 PEN/USD. Note that USD is the base currency for both exchange rates. Inflation is expected to hit 30% on annual basis in Argentina, 5% on annual basis in Peru, and 2% on annual basis in US. The 3-month nominal interest rate in Argentina is 25% per annum, and she will use PPP to forecast future exchange rates.

Required:

Question: What is the total amount of pesos she has to save today to pay for her trip? Please provide the complete solution of this problem.

Reference no: EM132432750

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