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Answer all questions below. a) In December 2005, the spot exchange rate for the British Pound was $1.7188/. Suppose that at the same time the

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Answer all questions below. a) In December 2005, the spot exchange rate for the British Pound was $1.7188/. Suppose that at the same time the one-year interest rate in the United States was 4.51% and the one-year interest rate in Great Britain was 3.55%. Based on these rates and assuming covered interest parity holds, the forward exchange rate consistent with no arbitrage is: (provide your answer as x.xxxx) b) In April 2022, the spot exchange rate for the British Pound was $1.2580/ and the one-year forward rate was $1.2517/. If covered interest parity holds, the spot rate and forward rate suggest that the one-year interest rate on USD is Select alternative an that on GBP. lower higher c) (continu praypal evidence suggests that the forward exchange rate is a biased predictor of the future spot rate. Based on this piece of evidence, the GBP is more likely to Select alternative against the USD over the next 12 months. Answer all questions below. a) In December 2005, the spot exchange rate for the British Pound was $1.7188/. Suppose that at the same time the one-year interest rate in the United States was 4.51% and the one-year interest rate in Great Britain was 3.55%. Based on these rates and assuming covered interest parity holds, the forward exchange rate consistent with no arbitrage is: V (provide your answer as x.xxxx) b) In April 2022, the spot exchange rate for the British Pound was $1.2580/ and the one-year forward rate was $1.2517/. If covered interest parity holds, the spot rate and forward rate suggest that the one-year interest rate on USD is Select alternative than that on GBP. c) (continued from part b). Empirical evidence suggests that the forward exchange rate is a biased predictor of the future spot rate. Based on this piece of evidence, the GBP is more likely to Select alternative gainst the USD over the next 12 months. depreciate appreciate

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