Question 1 (i) The UK inflation rate is predicted to be 4% and the Eurozone ination rate is predicted to be 9%. The current Euro per pound exchange rate is 1.50/1. What is the expected Euro per pound exchange rate in one year's time according to Purchasing Power Parity? Show your calculations. (5 marks) (ii) The $l spot rate is $1 .60/1. The UK interest rate is 6% and the US interest rate is 9%. Calculate the six month forward rate using the covered interest parity formula. Show your calculations. State if the dollar is at a forward discount or at a forward premium