1.

Suppose the current exchange rate for the Polish zloty is Z 2.75. The expected exchange rate in three years is Z 2.83. What is the difference in the annual inflation rates for the United States and Poland over this period?

(Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

2.

You observe that the inflation rate in the United States is 2.3 percent per year and that T-bills currently yield 2.8 percent annually.

a.	What do you estimate the inflation rate to be in Australia, if short-term Australian government securities yield 8 percent per year? (Round your answer to 1 decimal place. (e.g., 32.1))

Inflation rate

%

b.	What do you estimate the inflation rate to be in Canada, if short-term Canadian government securities yield 11 percent per year? (Round your answer to 1 decimal place. (e.g., 32.1))

Inflation rate

%

c.	What do you estimate the inflation rate to be in Taiwan, if short-term Taiwanese government securities yield 13 percent per year? (Round your answer to 1 decimal place. (e.g., 32.1))

Inflation rate

%