a. What is the current spot exchange rate for the Japanese yen/Australian dollar exchange rate?

b. Assuming purchasing power parity, and assuming that the forecasted change in consumer prices is a good proxy of predicted inflation, what is the forecast of the Japanese yen/US dollar in 1 year?

c. Using the spot rates and three-month interest rates, calculate the 90-day forward rates for Australian dollar/US dollar exchange rate:

d. Calculate the country's Misery Index (unemployment + inflation) and then use it like interest differentials to forecast the future spot exchange rate, one year into the future. What is the Australian dollar/US dollar exchange rate in 1 year based on this:

Please use this formulas:

a. /A$= /$ / A$/$

b. Forecast(/$)= Spot (/$) x (1 + -inflation) / (1 + $-inflation)

c. The 90-day forward rates for Australian dollar/US dollar exchange rate= Spot (A$/$) x (1 + i_A$ 3 month) / (1 + i_$ 3 month)

d. Forecast spot(A$/$) = Current Spot x ( 1 + Misery-A$ / ( 1 + Misery-$)

Gross Domestic Product Industrial Production Unemployment Rate Country Latest Qtr Qtr Forecast 2007 Forecast 2008 Recent Qtr Latest Australia 4.3% 3.8% 4.1% 3.5% 4.6% 4.2% Japan 1.6% -1.2% 20% 1.9% 4.3% 38% United States 1.9% 3.8% 2.0% 2.2% 1.9% 4.7% Consumer Prices Interest Rates Country Year Ago Latest Forecast 2007e 3-month Latest 1-yr Govt Latest Australia 40% 2.1% 2.4% 6.90% 6.23% Japan 0.9% -0.2% 0.0% 0.73% 1.65% United States 2.1% 2.8% 2.8% 4.72% 4.54% Trade Balance Current Account Current Units (per US$) Country Last 12 mos (billion $) Last 12 mos (billion $) Forecast 07 (% of GDP) Oct 17th Year Ago Australia -13.0 -$47.0 -5.7% 1.12 1.33 Japan 98.1 $197.5 4.6% 117 119 United States -810.7 $793.2 -5.6% 1.00 1.00 Gross Domestic Product Industrial Production Unemployment Rate Country Latest Qtr Qtr Forecast 2007 Forecast 2008 Recent Qtr Latest Australia 4.3% 3.8% 4.1% 3.5% 4.6% 4.2% Japan 1.6% -1.2% 20% 1.9% 4.3% 38% United States 1.9% 3.8% 2.0% 2.2% 1.9% 4.7% Consumer Prices Interest Rates Country Year Ago Latest Forecast 2007e 3-month Latest 1-yr Govt Latest Australia 40% 2.1% 2.4% 6.90% 6.23% Japan 0.9% -0.2% 0.0% 0.73% 1.65% United States 2.1% 2.8% 2.8% 4.72% 4.54% Trade Balance Current Account Current Units (per US$) Country Last 12 mos (billion $) Last 12 mos (billion $) Forecast 07 (% of GDP) Oct 17th Year Ago Australia -13.0 -$47.0 -5.7% 1.12 1.33 Japan 98.1 $197.5 4.6% 117 119 United States -810.7 $793.2 -5.6% 1.00 1.00