Money and foreign exchange markets in Japan and Swiss are quite efficient. You have the following information:

Japan Germany

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Spot exchange rate 100/DM SF0.01/

Expected inflation rate 2% per annum 5% per annum

One-Year T-bll rate Unknown 8% per annum

a. What is you estimate of the one-year T-bill rate in Japan?

b. What is your estimate of the one-year forward exchange rate between Japanese yen and SF?

c. What is your best estimate of the one-year future spot exchange rate between Japanese yen and SF?