1. Review the section of the website that provides interest rates for various countries (look under Rates & Bonds). Determine the prevailing one-year interest rate of the Australian dollar, the Japanese yen, and the British pound. Assuming a 2 percent real rate of interest for savers in any country, determine the expected rate of inflation over the next year in each of these three countries that are implied by the nominal interest rate (according to the IFE).
2. What is the approximate expected percentage change in the value of each of these currencies against the dollar over the next year when applying PPP to the inflation level of each of these currencies versus the dollar?