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please answer asap, thank you 3. Given the data below: Spot exchange rate Yen/Euro 1 year expected inflation rates in Japan 1 year expected inflation

please answer asap, thank you image text in transcribed
3. Given the data below: Spot exchange rate Yen/Euro 1 year expected inflation rates in Japan 1 year expected inflation rates in Euroland II. p.a. Tt*.p.a. 125/ 0.5% 2.5% 1) Calculate the expected future spot rate and the expected (ex ante) nominal rate of change in the exchange rate following the relative PPP over this one year period. (2 marks) 2) At the end of the one year period, the actual inflation rate turned out to be the same as expected inflation rate in both countries. However, the actual (ex post) nominal exchange rate turns out to be 124/. What was the real rate of appreciation (or depreciation) of the base currency over this one year period? (1 mark) 3) Based on your answers from (1) and (2), explain how the actual nominal rate of change deviates from the expected nominal rate of change, and also discuss how the real rate of change can account for such deviations. (2 marks)

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