Assume a forecaster uses PPP to forecast exchange rates. Assume that the current exchange rate is (USD/AUD) 1.8000 and the forecaster is trying to forecast the exchange rate one year from now. The following four scenarios are available for expected inflation rates during the coming year:

Scenario - Inflation Australia - Inflation U.S. - Probability

1. High inflation both: 10% - 8% - 0.19

2. High inflation Australia: 10% - 2% - 0.20

3. High inflation U.S: 3% - 8% - 0.15

4. Low inflation both: 3% - 2% - 0.55

(a) Calculate the forecast exchange rate for each scenario

(b) Calculate the weighted average (or expected) forecasted exchange rate