$1)$ The one$-$year interest rate is $3\%$ in the U$.$S$.$ and $6\%$ in the Eurozone. On the other hand, the one$-$year inflation is $6\%$ in the U$.$S$.$ and $10\%$ in the Eurozone. The spot exchange rate is $$1\mathrm{.}60/.$

a$)$ When the $1-$year forward market exchange rate is $$1\mathrm{.}50/.$ Figure out the one$-$year forward premium$/$discount for euro. $(20$points$)$

b$)$ What is the equilibrium one$-$year forward exchange rate based on Interest Rate Parity $($IRP$)?(20$points$)$

c$)$ What is the equilibrium one$-$year forward exchange rate based on Purchasing Power Parity $($PPP$)?(20$points$)$

d$)$ Given the difference between the forward market exchange rate of $$1\mathrm{.}50/$ and the equilibrium forward exchange rate based on IRP or PPP$,$

i$)$ Which currency is underpriced$/$undervalued on the forward market? Dollar or euro? $(20$points$)$

ii$)$ Which position do you want to take for the forward contract? A long position or short position for euro? $(20$points$)$