1)as per IRP, we use interest rate A =$:-US B=pound:-UK expected spot rate:- E(S)/S=(1+ra)/(1+rb) 2019:- E(s)=((1.05)/(1.03))*1 =1.0194 2020:- E(s)=((1.05)/(1.03)) *1.0194 =1.0392 2021:- E(S)=((1.05)/(1.03)) *1.0392 =1.0594 as per RPPP, we use inflation rate E(s)/S=(1+la)/(1+1b) 2019:- E(s)=((1.03)/(1.05))*1 =0.9810 2020:- E(s)=((1.03)/(1.05))*0.9810 =0.9623 2021:- E(S)=((1.03)/(1.05)) *0.9623 =0.9440 2 (10 points). Using the values from Question 1, compute the Mean Absolute Percentage Error (MAPE) of the IRP and the RPPP models. 3 (10 points). Identify the model that you choose to forecast an average annual spot exchange rate, S/ for the Year 2022 4 (0 points). Compute the spot exchange rate ($/) of Year 2022 and justify your forecast for Year 2022 exchange rate 1)as per IRP, we use interest rate A =$:-US B=pound:-UK expected spot rate:- E(S)/S=(1+ra)/(1+rb) 2019:- E(s)=((1.05)/(1.03))*1 =1.0194 2020:- E(s)=((1.05)/(1.03)) *1.0194 =1.0392 2021:- E(S)=((1.05)/(1.03)) *1.0392 =1.0594 as per RPPP, we use inflation rate E(s)/S=(1+la)/(1+1b) 2019:- E(s)=((1.03)/(1.05))*1 =0.9810 2020:- E(s)=((1.03)/(1.05))*0.9810 =0.9623 2021:- E(S)=((1.03)/(1.05)) *0.9623 =0.9440 2 (10 points). Using the values from Question 1, compute the Mean Absolute Percentage Error (MAPE) of the IRP and the RPPP models. 3 (10 points). Identify the model that you choose to forecast an average annual spot exchange rate, S/ for the Year 2022 4 (0 points). Compute the spot exchange rate ($/) of Year 2022 and justify your forecast for Year 2022 exchange rate