(10 points) Due to the integrated nature of their capital markets, investors in both the U.S. and U.K. require the same real interest rate of 2.5% on their lending. There is consensus in capital markets that the annual inflation rate is likely to be 3.5% in the U.S. and 1.5% in the U.K. for the next three years. The spot exchange rate is currently $1.50E. a. Compute the nominal interest rate p.a. in both the U.S. and U.K., assuming that the Fisher effect holds. (Use the approximate formula of the Fisher effect, ignoring the cross-product term.) What is your expected future spot dollar-pound exchange rate three years from now? b