QUESTION03: Assume that the U.S. six-year interest rate is currently 3 percent compounded annually, while the British six-year interest rate is 1 percent compounded annually. Assume also that the current spot rate is $1.2500/. Given this information, you can infer the forward rate using the interest rate parity as __________ and forecast the exchange rate as __________ six years from now.

$1.2500/

$1.2747/

$1.3024/

$1.4061/

$1.5547/

QUESTION04: Suppose you are using technical forecasting to predict the exchange rate of the Mexican peso. The peso value declined below a specific threshold level in the last few weeks. Based on this observation, you can forecast that the pesos value will continue to _______ now that it is beyond the threshold level.

fall

rise