James Cook, an international fund manager, uses the concepts of purchasing power parity (PPP) and the International Fisher Effect (IFE) to forecast spot exchange rates. James Cook gathers the financial information as follows:

Currentandspotexchangerate-$0.053

ExpectedannualU.S. inflation - 4% Expectedannual SouthAfricaninflation-6%

ExpectedU.S.one-year interestrate-5.50% Expected South Africanone-yearinterestrate - 8.25%

Both interest rates given above are nominal interest rates.

Calculate the following exchange rates (ZAR and USD refer to the South African rand and U.S. dollar, respectively). The interest rate given is the nominal interest rate.

a. Using the IFE, the expected ZAR spot rate in USD one year from now.

b. Using PPP, the expected ZAR spot rate in USD one year from now.

c. Using IRP (interest rate parity), the one-year ZAR forward rate in USD.