\#2 Given et=1.15+.04INFt1+.03INTt+t et = percentage change in $ per INFt-1 = difference in last periods inflation INT = difference in interest rates t= error term Inflation was 2% in US and 4% in Europe. Interest rates are 4% in US and 5.5% in Europe. What is the predicted exchange rate? What is the premium/discount based upon inflation? What is the premium/discount based upon interest rates? \#2 Given et=1.15+.04INFt1+.03INTt+t et = percentage change in $ per INFt-1 = difference in last periods inflation INT = difference in interest rates t= error term Inflation was 2% in US and 4% in Europe. Interest rates are 4% in US and 5.5% in Europe. What is the predicted exchange rate? What is the premium/discount based upon inflation? What is the premium/discount based upon interest rates