Question: A family in Mexico is planning a vacation to Valley Forge, Pennsylvania, USA six months from now. The current cost of the trip accommodations is $2500. However, the dollar cost of the accommodations would be adjusted to any increase in the U.S. cost of living. Specifically, the U.S. inflation is expected to be 2.2% per year, while Mexican inflation is expected to be 4.8% per year.
Assuming that PPP holds at every point during the year, what is the expected exchange rate six months from now if the Mexican peso presently trades at Ps20.00/$?