The Mexican peso has weakened considerably relative to the dollar
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The Mexican peso has weakened considerably relative to the dollar

1. The Mexican peso has weakened considerably relative to the dollar, and you are trying to decide whether this is a good time to invest in Mexico. Suppose the current exchange rate of the Mexican peso relative to the U.S. dollar is MXN9.5/USD. Your investment advisor at Goldman Sachs (an investment banker) argues that the peso will lose 15% of its value relative to the dollar over the next year.

Required:

(a) What is Goldman Sachs’s forecast of the exchange rate in 1 year?

Hint
Accounts & FinanceA forecast of the exchange rate is an estimate or prediction of the future value of one currency relative to another currency. This forecast is based on various factors such as economic conditions, political events, market trends, and other factors that may influence the value of the currencies being compared. Forecasting exchange rates can be important for businesses and inv...
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