1. Using the spot rates and 3-month interest rates, calculate the 90-day forward rates for:

a. Japanese yen/U.S. dollar exchange rate

b. Japanese yen/Australian dollar exchange rate

c. Australian dollar/U.S. dollar exchange rate

2. Calculate the country's Misery Index (unemployment + inflation) and then use it like an interest differential to forecast the future spot exchange rate, one year into the future.

a. Japanese yen/U.S. dollar exchange rate in one year

b. Japanese yen/Australian dollar exchange rate in one year

c. Australian dollar/U.S. dollar exchange rate in one year

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Forecasting the Pan-Pacific Pyramid: Australia, Japan and The United States Gross Domestic Product Industrial Production Unemployment Rate Latest Qtr 4.3% 1.6% 1.9% Forecast 2007e 4.1% 2.0% 2.0% Qtr* Australia Japan United States 2008e 3.5% 1.9% 2.2% Recent Qtr 4.6% 4.3% 1.9% Latest 4.2% 3.8% 4.7% 3.8% 3.8% Consumer Prices Interest Rates 1-Yr Govt Latest 6.23% 1.65% 4.54% Year Ago 4.0% 0.9% 2.1% Trade Balance Last 12 Mos billion S) -13.0 Latest Australia Japan United States 2007e 4% 0.0% 28% 2.1% 6.90% 0.73% 4.72% Curent Account Current Units (per U.S.s) Last 12 Mos (billion S) -$47.0 $197.5 -$793.2 Forecast 07 (% of GDP Year Ago 1.33 119 1.00 0ct 17th 1.12 Australia Japan United States 98.1 4.6% 810.7 -56% 1.00