Question 8 a) Let us suppose that the Yen/Pound spot (exchange) rate is given as 160.509 - 161.484, that is, it is usually given as a bid-ask combination, i.e. 160.509/ -- 161.484/. Calculate the following: (0) (ii) The cost of buying $2,500,000 in . The cost of buying 4,000,000 in . If you want to sell 250,000,000, how much will you get in ? If you want to sell 3,500,000, the amount of yen received will be? (iv) b) Let us suppose that the spot rate between the Japanese Yen and the British pound is given to be 160/. For the upcoming year, inflation in the UK is expected to be 0.4% and that in Japan it is predicted to be 0.5%. If the Purchasing Power Parity (PPP) holds, what will be the / spot (exchange) rate in the following year? (6 marks) I c) If a one-year government bond in Japan has a 1.5% yield and it is 1% for the UK one-year bond, what will be the current one-year forward rate assuming that the interest rate parity (IRP) holds? Illustrate your answer by providing the IRP diagram as well (assume the same spot rate as in part (b)