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6. Measurement of forecast error The following table shows an MNC's forecasted and realized values for one time period for the Canadian dollar and the euro. Currency Forecasted Value Realized Value Canadian Dollar $0.77 $0.70 Euro $1.52 $1.60 For the current period, the forecast error (as a percent of the realized value) for the Canadian dollar is :] percent while the forecast error (as a percent of the realized value) for the euro is percent. (Hint: Input your answers as positive numbers.) In general, in periods when the value of a currency is more volatile, the resulting forecast error will be V Suppose that Chance Co. believes that movements in the value of the British pound (as measured by percentage change from the previous quarter), ef, are dictated entirely by the inflation rate differential between the pound and the U.S. dollar in the current quarter Inft. That is, the firm uses the following regression equation to forecast the change in the value of the pound in 3 months: ef=bg+bllnfr+m Where [1, is the error term and ho is a constant. Suppose that Chance Co. estimates be to be 0.0 and b1 to be 0.7. Chance Co. seeks to conduct a sensitivity analysis. The MNC determines that there are 3 possible values for the inflation differential in 3 months, each with a certain probability of occuring. This data is summarized in the following table. Complete the sensitivity analysis by entering the remaining expected exchange rate movements. Then answer the question that follows. Possible Value of Inflation Differential Expected Exchange Rate Movement (INFf) Probability of Occurrence (8f) 1% 25.00% percent 2% 50.00% 1.4 4% 25.00% percent While the best guess for the expected exchange rate movement is :] percent, the sensitivity analysis specifies the possible other values for the pound's exchange rate movement