1. (10%) The foreign exchange (FX) market is in equilibrium when the domestic and foreign returns are equal. Suppose the dollar interest rate is 5%, the euro interest rate is 3%, and the expected future exchange rate (one year ahead) is 1.224 $/. a. What is spot exchange rate under new equilibrium in the short run in case of a higher domestic interest rate, is = 7%? b. What is spot exchange rate under new equilibrium in the short run in case of a lower foreign interest rate, ie = 2% ? C. A lower expected future exchange rate, Exe = 1.19 $/