1. Recall that the uncovered interest parity condition in year t is: EHE-EHIE RH,1 = Rer+ (1) EHIE. where Ehler is the spot exchange rate of Home currency per unit of Foreign cur- rency and Ex, is the expected exchange rate of Home currency per unit of For- eign currency in year t+1. RH, and Rgr are the Home and Foreign interest rates in year t, respectively. 2. a) Express the spot exchange rate Ehi F2020 in terms of E1F2020, R9,2020, and R2020 b) Assume that investors correctly expect the exchange rate in the next year. That is, EM1,8 = Ehler+1 (2) for any year t. Express the spot exchange rate EH/F2020 in terms of Ex F2021) (RH,2020, RH,2021} and {RF,2020, RF2021). c) Assume that RH,2020 = RF2020, and RH,2021 = RF:2021 = 2%. In year 2020, the Home central bank announces that RH,2021 will be increased from 2% to 3% in year 2021. How much does EH/F2020 change? d) Again, assume that Eq. (2) holds. Express the spot exchange rate EH16:2020 in terms of EF.2119, (RH,2020, ..., RH,2119) and (RF:2020, ..., R2119). e) Assume that initially, from year 2020 to year 2119, the Home and Foreign in- 1 terest rates are the same. That is, RH,1 = Ret for t = 2020,..., 2119. Now, in year 2020, the Home central bank announces that RH,2119 will be increased by 1 percent in year 2119. How much does EH/F,2020 change