Today’s spot rate of the Mexican peso is $.10. Assume that purchasing power parity holds. The U.S. inflation rate over this year is expected to be 7 percent, while theMexican inflation over this year is expected to be 3 percent. Wake Forest Co. plans to import from Mexico and will need 20 million Mexican pesos in 1 year. Determine the expected amount of dollars to be paid by the Wake Forest Co. for the pesos in 1 year.
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