3. Assume that the following regression model was applied to historical annual data: "=a+ BINT: + + INC + 8 TB, + 81, where ex is the percentage change in the USD/MYR exchange rate in period t (MYR= Malaysian Ringgit), INT, is the interest rate differential between Malaysia and the U.S. in period t. INC, is the income growth rate differential between Malaysia and the U.S. in period t, TB, represents the change in the U.S. trade balance and e, is an error term. Assume that the regression coefficients were estimated as D = 002 B = 90 1=-85 6 =160 This year the change in the U.S. trade balance, TB, is forecasted to be 15% and the income growth rate differential, INC., is forecasted to be 452. This year INT, is forecasted as follows: INT Probability -3% 10 -2% .30 .50 4% .10 Now, you have to answer the following questions: D Using the above information, what will be your forecast for en? (ii) Assume Sui is equal to 4.10 MYR/USD. Using the regression model, forecast S. (iii) What is your Random Walk forecast for St? (iv) Suppose S. = .25 USD/MYR. Looking at (ii) and (iii). which forecast has the lowest squared error