Question 4 a) (20 Marks) The inflation rate in the United States is projected at 3 percent per year for the next several years. The New Zealand inflation rate is projected to be 5 percent during that time. The exchange rate is currently NZ$ 1.66. Based on relative PPP, what is the expected exchange rate in two years? (8 Marks) b) The spot and 360-day forward rates on the Swiss franc are SF 2.1 and SF 1.9, respectively. The risk-free interest rate in the United States is 6 percent, and the risk-free rate in Switzerland is 4 percent. Is there an arbitrage opportunity here? How would you exploit it? (6 Marks) c) i) Suppose you have just celebrated your birthday. A rich uncle has set up a trust fund for you that will pay you $150,000 when you turn 30. If the relevant discount rate is 9 percent, how much is this fund worth today? (4 Marks) ii) You think you will be able to deposit $4,000 at the end of each of the next three years in a bank account paying 8 percent interest. You currently have $7,000 in the account. How much will you have in 3 and 4 years?