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1. An analyst wanted to forecast exchange between USD/BRL. He collected the following information: . a.Using the PPP model estimate forecast for USD/BRL for November

1. An analyst wanted to forecast exchange between USD/BRL. He collected the following information: .

a.Using the PPP model estimate forecast for USD/BRL for November 2013. Also calculate forecast error for the month of November. Now assume that analyst got actual inflation estimates for the month of November from the government publications for the US and Brazil and they are as follows:

b. Using the PPP model estimate forecast for USD/BRL for December 2013. Also calculate forecast error for the month of December.

c. Now that you have two forecast errors from a and b calculate mean square error for your forecasts.

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