3. At the end of February 2020, a three-person team of analysts (Terry, Jakc, and Chloc) met to forccast the future movement of the South African rand versus the USD. Below is a graph showing the historical cvolution of the USD/ZAR exchange rate compared to its PPP predicted evolution from Fcb. 2015 through February 2020, when the nominal quoted exchange rate was 15.20 and the PPP-consistent exchange rate was 14.40. Also shown are thc 3., 6., 9., and 12 month forward exchange rates quoted at the end of February. 11 USD/ZAR exchange rate data; invertod vertical scale 11.73 12 Nominal ----PPP-consistent Forward 13 14 14.40 15.20 15 16 Aug-15 81-*ny Fel-19 Aug-19 Feb 20 -Aug-20 1cb-21 a) Which country had higher inflation over the Feb. 2015-Feb. 2020 period? 4_Sourh Africa BUnited Srares b) Identify periods when i) the ZAR was undervalued by PPP, ii) overvalued, and iii) experienced mean 1CVCTSion. c) Based on PPP, the quoted nominal spor rate of USD/ZAR 15.20 in Feb. 2020 appeared to be: 22.8% undervalued B__ 5.3% undervalued C_5.6% overvalued D_29.6% overvalued d) Teri, a financial research analyst, relied on the expectations hypothesis to forecast movements of the exchange rate over the next year. Identify Turi's forecast of the USD/ZAR exchange rate twelve months later in Feb. 2021. USD/ZAR e) Jake, another a research analyst, relied on relatie purchase power purity to forecast exchange rates. Jake estimated future inflation to be 2.01% in the United States and 6.7% in South Africa. Identify Jakes's forecast of the USD/ZAR spot exchange rate for Feb. 2021. USD/ZAR f) Chloe strongly believed that over the following twelve months mean reversion of the real USD/ZAR cxchange rate was highly likcly to occur. Bricfly discuss why Chloe's forecast for the ZAR's movement over the next twelve months differed from Teri's and Jake's respective forecasts. 3. At the end of February 2020, a three-person team of analysts (Terry, Jakc, and Chloc) met to forccast the future movement of the South African rand versus the USD. Below is a graph showing the historical cvolution of the USD/ZAR exchange rate compared to its PPP predicted evolution from Fcb. 2015 through February 2020, when the nominal quoted exchange rate was 15.20 and the PPP-consistent exchange rate was 14.40. Also shown are thc 3., 6., 9., and 12 month forward exchange rates quoted at the end of February. 11 USD/ZAR exchange rate data; invertod vertical scale 11.73 12 Nominal ----PPP-consistent Forward 13 14 14.40 15.20 15 16 Aug-15 81-*ny Fel-19 Aug-19 Feb 20 -Aug-20 1cb-21 a) Which country had higher inflation over the Feb. 2015-Feb. 2020 period? 4_Sourh Africa BUnited Srares b) Identify periods when i) the ZAR was undervalued by PPP, ii) overvalued, and iii) experienced mean 1CVCTSion. c) Based on PPP, the quoted nominal spor rate of USD/ZAR 15.20 in Feb. 2020 appeared to be: 22.8% undervalued B__ 5.3% undervalued C_5.6% overvalued D_29.6% overvalued d) Teri, a financial research analyst, relied on the expectations hypothesis to forecast movements of the exchange rate over the next year. Identify Turi's forecast of the USD/ZAR exchange rate twelve months later in Feb. 2021. USD/ZAR e) Jake, another a research analyst, relied on relatie purchase power purity to forecast exchange rates. Jake estimated future inflation to be 2.01% in the United States and 6.7% in South Africa. Identify Jakes's forecast of the USD/ZAR spot exchange rate for Feb. 2021. USD/ZAR f) Chloe strongly believed that over the following twelve months mean reversion of the real USD/ZAR cxchange rate was highly likcly to occur. Bricfly discuss why Chloe's forecast for the ZAR's movement over the next twelve months differed from Teri's and Jake's respective forecasts
