b) Your managing director has received forecasts of US$ exchange rates in two years' time from the leading banks. $/ forecasts 13 November 2021 Pallbank 1.25 Superbank 1.55 Emubank 1.68 The current spot mid-rate (13 November 2019) is $1.5240/. A non-executive director of your company has suggested that in order to forecast future exchange rates, the interest rate differential between countries should be used. She states that 'as short-term interest rates are currently 6% in the UK, and 8.5% in the USA, the exchange rate in two years time will be $1.597/'. Required You have been asked by your managing director to prepare a brief report discussing: i. the likely validity of the non-executive director's estimate (10 marks) ii. possible reasons for the wide spread of forecast by the banks. (5 marks) b) Your managing director has received forecasts of US$ exchange rates in two years' time from the leading banks. $/ forecasts 13 November 2021 Pallbank 1.25 Superbank 1.55 Emubank 1.68 The current spot mid-rate (13 November 2019) is $1.5240/. A non-executive director of your company has suggested that in order to forecast future exchange rates, the interest rate differential between countries should be used. She states that 'as short-term interest rates are currently 6% in the UK, and 8.5% in the USA, the exchange rate in two years time will be $1.597/'. Required You have been asked by your managing director to prepare a brief report discussing: i. the likely validity of the non-executive director's estimate (10 marks) ii. possible reasons for the wide spread of forecast by the banks