1a) Suppose the spot rate on June 1, 2001 was 1.01 = $1.00, and exactly 90 days later the spot rate changed to 0.99 = $1.00. The interest rate in the eurozone was 8% and in the U.S was 6%. What is the effective dollar interest rate from the eurozone deposit? Hint: Annualize the rate.

1b) Suppose last year, the inflation in the U.S. was 6% and in Thailand was 32%. The exchange rate was B25/$. This year the exchange rate has moved to B35/$. What is the real exchange rate? (The U.S. is the home country.)