1. What is the expected dollar rate of return on euro deposits if today's exchange rate is $1.10 per euro, next year's expected exchange rate is $1.166 per euro, the dollar interest rate is 10%, and the euro interest rate is 5%? 2. Suppose that today European Central Bank (ECB) announced they will increase policy interest rate in three months. (Also suppose it is a new information) Describe the effects of the ECB announcement on US dollar/Euro exchange rate today. Use the diagram for asset market approach discussed in class. 3. Illustrate Yen-carry trade (between Japan and Australia) in the asset market model diagram. Assume that Japanese Yen is domestic currency and Australian Dollar is the foreign currency. Japanese domestic interest rate is , Australian domestic interest rate is, and Japanese Yen per Australian Dollar is