1)(2 pts) Percentage Appreciation. Assume the spot rate of the British pound is $1.242. The expected spot rate one year from now is assumed to be $1.278. What percentage appreciation does this reflect?

2)(3 pts) Interest Rate Effects on Exchange Rates. Assume U.S. interest rates fall relative to British interest rates. Other things being equal, how should this affect the (a) U.S. demand for British pounds, (b) supply of pounds for sale, and (c) equilibrium value of the pound?