International Financial Management 2nd Edition by Geert Bekaert ,Robert Hodrick

Exercise 10

The Mexican peso has weakened considerably relative to the dollar, and you are trying to decidewhether 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 argues that the peso will lose 15% of its value relative to the dollar over the next year. What is Goldman Sachs's forecast of the exchange rate in 1 year