Assume the following information is available for the U.S. and Europe:
		U.S.	Europe
	Nominal interest rate (ih and if) for ease of notation in Excel, that subscripts aren't used here	4%	6%
	Expected inflation (Ih and If)	2%	5%
	Spot rate	N/A	$1.13
	One-year forward rate	N/A	$1.10
a. Does IRP hold?
b. According to PPP, what is the expected spot rate of the euro in one year?
c. According to the IFE, what is the expected spot rate of the euro in one year?
d. Reconcile your answers to parts (a). and (c).
Hints:	Solution should be as the following:
a	Using IRP, Forward premium (p) =
	Expected forward rate for the euro
b	Using PPP, expected spot rate in one year = ef		$/euro
	expected spot rate in one year =
c	Using IFE, expected spot rate in one year =
	expected spot rate in one year =		$/euro
d