1. (20 points) An investor has $10,000 and is comparing returns between investing in the U.S. or Japan. U.S. interest rates are 5%, Japanese interest rates are 0.5%, and the 1-year future exchange rate is = 145.0 /$. Calculate the spot (current or today's) exchange rate Eo in /$ that makes the investor indifferent where she invests (interest rate parity). If Japanese interest rates increase to 1.5% and all else remains the same, calculate the new spot exchange rate so that makes investors indifferent. Does the Japanese Yen appreciate or depreciate after the increase in Japanese interest rates? Fill in all the blanks in the Interest Parity graphs below to arrive at the spot exchange rates and answer the last question in the box. time = 0 $10,000 Eo=. time = 0 $10,000 Eo= United States - i = 5.0% \/$ i = 0.5% Japan \/$ United States - i = 5.0% Does the Yen appreciate or depreciate after Japanese interest rates increase? i = 1.5% Japan $ 1 time = 1 E1 = 145.0 \/$ $ time = 1 &1 = 145.0 \/$