a) According to Interest Rate Parity, if the Interest rate is 6% in Italy what would we expect to see to happen to the value of the Euro relative to AUD? (Choose the most appropriate answer.) (1 Mark) Answer APPRECIATE DEPRECIATE b) If Australi INDETERMINABLE D is 0.99 and the annual interest rate is 4% in at is the fair price to pay for a 4-month (120 day) b) If the spot rate for AUD/USD is 0.99 and the annual interest rate is 4% in Australia and 6% in the USA what is the fair price to pay for a 4-month (120 day) AUD/USD Forward contract purchased today? (2 Marks) Answer as a decimal to 4 decimal places. Answer: AUD/USD c) If the spot rate for CAD/AUD is 0.9 and the annual interest rate is 4% in Canada and 3% in Australia is there an arbitrage opportunity if the 12-month (360 day) CAD/AUD Forward contract price quoted today is 0.9078? (Choose the most appropriate answer.) (1 Mark) Answer d) AC decreas the mos YES wer Parity, if inflation increases in one country and NO the exchange rate of the first country to: (Choose INDETERMINEABLE Mark) d) According to Purchasing Power Parity, if inflation increases in one country and decreases in another, we expect the exchange rate of the first country to: (Choose the most appropriate answer.) (1 Mark) Answer APPRECIATE DEPRECIATE INDETERMINEABLE