1. If the return on United States dollar deposits (i_$) is 2.5%, the expected dollar-peso exchange rate (E^e_$/MP) is $0.0475 per peso, and dollar-peso spot rate(E_$/MP) is $0.05, what is the return on peso deposits (i_MP)? (Hint: When you're doing the calculations, convert the peso interest rate into a decimal [i.e., 0.025]. Once you have your answer, convert it back to a percentage.)

2. A Fendi leather tote handbag costs 450 in Italy.The same handbag costs $500 in the United States. The spot dollar-euro exchange rate is E_$/ = $1.05. (To simplify things, we are not including transaction costs.)

(a) Calculate the real exchange rate using the prices given.

(b) Do the prices for the handbag suggest that the dollar under or overvalued in the spot market? If so, by how much? Report the under or overvaluation as a percentage to one decimal place.

3. Please calculate the Home/Fili exchange rate, E_H/F. Home's currency is the homie (H). Fiji's currency is the dollar (F). Home has a money supply of H10,000. Home's gross domestic product (GDP) is H1,000. Home's liquidity constant is 2. Fijian's money supply is F10,000,000. Fijian's gross domestic product is F2,000,000. Fijian's liquidity constant is also 2. Be sure to include the relevant equation and calculations in your answer

4. During the COVID 19 pandemic, the United States' money supply is growing at a rate of 10 percent, and real US GDP is growing by 1 percent. The euro area's money supply is expanding by 15 percent, and real GDP growth in the euro area is 0.5 percent. The dollar/euro spot exchange rate is 1.10. Usingthe simple modelof the monetary approach()to predict the USdollar/euro exchange rate:

a. What would the exchange rate change be?Be sure to include the relevant equation and calculations in your answer

b. What would the expected exchange rate be? Be sure to include the relevant equation and calculations in your answer