I need help with the following question.

3. Consider two bonds, one issued in Euros in Germany, one issued in dollars in the United States. Assume that both government securities are one-year bonds - paying the face value of the bond one year from now. The exchange rate, E, stands at 1 Euro - $1.46. The face value and prices on the two bonds are given by: Face Value Price United States 1-year bond $10,000 $9,615.38 Germany 1-year bond Euros 13,333 Euros 12,698.10 (a) Suppose it's denotes the interest rate in the U.S., and icea denotes the interest rate in Germany. Compute the nominal interest rates, igs and iGER. Clearly show all calculations. (5 points) (b) There exists a market for buying and selling foreign exchange one year in the future, at a price determined today - this price is called the forward exchange rate. Denote the forward price of 1 Euro in terms of dollars by Fi+1. In other words, you can enter into a contract today to sell 1 Euro for Fit, dollars one year in the future. Assume you are a U.S. investor. You exchange dollars for Euros and purchase the German bond. The forward rate, denoted by Fi+1 is $1.50/Euro. Calculate the effective/realized rate of return from the German bond. Based on the interest rates calculated in part (a) and the current exchange rate, would you prefer to invest in the U.S. or in Germany? Clearly show all calculations. (5 points) (c) The covered interest parity equation is given by: (1 + ius) - F. (1 + iGER) Fit1 where in's denotes the one-year interest rate in the U.S., and igga denotes the one- year interest rate in Germany. Explain why the covered interest rate parity equation makes sense. Use a well labeled graph to illustrate your arguments. (5 points) (d) Given the two government bonds and current exchange rate, find the forward exchange rate of 1 Euro consistent with covered interest rate parity equation given in part (c). (5 points) (e) What should you do if the forward exchange rate is actually different from the value you calculated in part (d)? (5 points)