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2. Suppose the Euro/Dollar Exchange Rate is 1 = $1.7271, the annual US riskfree rate is 6.31%, the US inflation rate is 4.52%, the annual
2. Suppose the Euro/Dollar Exchange Rate is 1 = $1.7271, the annual US riskfree rate is 6.31%, the US inflation rate is 4.52%, the annual Eurozone riskfree rate is 3.15%, the Eurozone inflation rate is 2.65%, and the one-year Forward Euro/Dollar Exchange Rate is 1 = $1.8241. What will the Euro/Dollar Exchange Rate be in one-year, two-years, three-years, four-years, and five-years under three forecast methods: (1) purchasing power parity, (2) interest rate parity + expectations theory of exchange rates, and (3) using just the expectations theory of exchange rates
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