Assume that interest rate parity holds. The U. S. five‑year interest rate is 5% annualized, and the Mexican five‑year interest rate is 8% annualized. Today’s spot rate of the Mexican peso is $.20. What is the approximate five‑year forecast of the peso’s spot rate if the five‑year forward rate is used as a forecast?

Using equation

F=P(1+i)^n

n=5

using u.s forecast i=0.05

p=$0.2

F=0.2(1+0.05)^5

F=$0.255

Using mexican forecast,we will have

i=0.08

F=$0.2938

Taking average approximate forecast=0.2938+0.255/2=$0.2744

x=3

step-by-step explanation:

this is really simple i saw that there was only one term (5x) and thought if that was 15 what would i have to multiply everything else to get it there? well if 5x became 15 then x would have to be 3 so plug the 3 in the x for the other equations and you get 15 for the other ones. so there you go. : )

answer; bootstrapping is your answer;