Question 1 (a) Assume that the spot exchange rate of the South African Rand is 1.73. How will this spot rate adjust according to Purchasing Power Parity (PPP) if South Africa experiences an inflation rate of 7 percent while Zambia experiences an inflation rate of 2 percent? (10 Marks) (b) With the aid of a practical example, explain how a Zambian corporation could hedge net receivables in rands with futures contracts. (10 Marks) (c) Tom Sakala is looking to make and investment in either Namibia or Eswatini, but is uncertain about how the exchange rate will be in a years' time. He has found the following data on the future interest rates for both countries: Namibia 6% Eswatini 9% One year interest rates Using appropriate exchange rate forecasting theory, explain which country will have the stronger currency exchange in one years' time? (10 Marks) [30 Marks]