An investment company is considering an investment in the United States. Interest rates in Australia is currently 3.5% pa whilst in the United States is 4% pa. The USD is currently trading at a spot rate of AUD/USD 0.7. (a) Based on interest parity what would you forecast the spot rates would be in one year from now and in two years from now? ( 1 mark) (b) If the expected cash inflow of US\$10 million in year 2 and the 2 -year forward exchange rate is trading at 0.71 should the investor take out forward cover? Explain clearly. ( 4 marks)