b. c. d. e. 1. The interest rate on South Korean government securities with one-year maturity is 4 percent, and the expected inflation rate for the coming year is 2 percent. The interest rate on U.S. government securities with one-year maturity is 7 percent, and the expected rate of inflation is 5 percent. The current spot exchange rate for Korean won is $1 = W1,200. Forecast the spot exchange rate one year from today. Explain the logic of your answer. 2. Two countries, Great Britain and the United States, produce just one good: beef. Suppose the price of beef in the United States is $2.80 per pound and in Britain it is 3.70 per pound. a. According to PPP theory, what should the dollar/pound spot exchange rate be? b. Suppose the price of beef is expected to rise to $3.10 in the United States and to 4.65 in Britain. What should the one-year forward dollar/pound exchange rate be? c. Given your answers to parts a and b, and given that the current interest rate in the United States is 10 percent, what would you expect the current interest rate to be in Britain? f. 4. Y al 11 S 5. b. c. d. e. 1. The interest rate on South Korean government securities with one-year maturity is 4 percent, and the expected inflation rate for the coming year is 2 percent. The interest rate on U.S. government securities with one-year maturity is 7 percent, and the expected rate of inflation is 5 percent. The current spot exchange rate for Korean won is $1 = W1,200. Forecast the spot exchange rate one year from today. Explain the logic of your answer. 2. Two countries, Great Britain and the United States, produce just one good: beef. Suppose the price of beef in the United States is $2.80 per pound and in Britain it is 3.70 per pound. a. According to PPP theory, what should the dollar/pound spot exchange rate be? b. Suppose the price of beef is expected to rise to $3.10 in the United States and to 4.65 in Britain. What should the one-year forward dollar/pound exchange rate be? c. Given your answers to parts a and b, and given that the current interest rate in the United States is 10 percent, what would you expect the current interest rate to be in Britain? f. 4. Y al 11 S 5