Economics

1.1. Interest rates in Italy are 5% higher than interest rates in the US. Furthermore, expected inflation in Italy is only 2%. What is the expected rate of inflation in the US?

a. -3%

b. -2%

c. 2%

d. 3%

e. 7%

1.2. If the interest rate differential between US and EU is 10%, with interest rates higher in the US, and the expected exchange rate Ee t+1 is USD 2/EUR, what is the current exchange rate Et?

a. USD 1.8000/EUR

b. USD 1.8181/EUR

c. USD 2.0000/EUR

d. USD 2.2000/EUR

e. USD 2.2222/EUR

1.3. Companies engaged in international business have the following foreign exchange exposure:

a. Economic exposure.

b. Translation exposure.

c. Translation exposure.

d. a and b.

e. a, b, and c

Explain with proper calculation please and give me correct answer...thank you.i will give you like