2. (4,5 points) Current Spot Rates. What are the current spot exchange rates for the following cross rates?

a. Japanese yen/U.S. dollar exchange rate

Japanese yen/U.S. $ is 114/$

b. Japanese yen/Australian dollar exchange rate

114/1.15=99.13

c. Australian dollar/U.S. dollar exchange rate

Australian $/U.S. $ is Australian $ 1.15/ U.S.$

3. (4,5 points) Purchasing Power Parity Forecasts. Assuming purchasing power parity, and assuming that the forecasted change in consumer prices is a good proxy of predicted inflation, forecast the following cross rates:

a. Japanese yen/U.S. dollar in one year

b. Japanese yen/Australian dollar in one year

c. Australian dollar/U.S. dollar in one year

4. (4,5 points) International Fischer Forecasts. Assuming International Fisher applies to the coming year, forecast the following future spot exchange rates using the government bond rates for the respective country currencies:

a. Japanese yen/U.S. dollar in one year

b. Japanese yen/Australian dollar in one year

c. Australian dollar/U.S. dollar in one year

5. (4,5 points) Implied Real Interest Rates. If the nominal interest rate is the government bond rate, and the current change in consumer prices is used as expected inflation, calculate the implied "real" rates of interest by currency.

a. Australian dollar "real" rate

b. Japanese yen "real" rate

c. U.S. dollar "real" rate