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Problem 4. 4a. Explain what the equation below is stating: (2 points) EE (P/P) 4b. A bond is issued in Euros in France and another is issued in dollars in the U.S. Assume that both bonds are one-year bonds and will pay the face value in one year from now The present exchange rate, E, is 0.80 euros per dollar. The face value and prices of the two bonds are shown below. Face Value Price U.S France 10,000 9.400 4b-i. Compute the nial nterest ate for each of the bonds: 4 points) U.S. rance 4b-ii. Compute the expected interest rate next year consistent with uncovered interest parity. (2 points) b-li. If you expect the dollar to appreciate relative to the euro, which bond would you buy and why? (2 points) Problem 4. 4a. Explain what the equation below is stating: (2 points) EE (P/P) 4b. A bond is issued in Euros in France and another is issued in dollars in the U.S. Assume that both bonds are one-year bonds and will pay the face value in one year from now The present exchange rate, E, is 0.80 euros per dollar. The face value and prices of the two bonds are shown below. Face Value Price U.S France 10,000 9.400 4b-i. Compute the nial nterest ate for each of the bonds: 4 points) U.S. rance 4b-ii. Compute the expected interest rate next year consistent with uncovered interest parity. (2 points) b-li. If you expect the dollar to appreciate relative to the euro, which bond would you buy and why? (2 points)