Suppose the current spot FX rate is S0(/$) = 0.60/$. The consensus long-term forecast for US inflation is 5% per year, while the long-term forecast for UK inflation is 3%. By what percentage do you expect the spot rate to change over the coming year.

Estimate the spot FX rates which will obtain for the next five years. That is, estimate S1(/$), S2(/$), S3(/$), S4(/$), and S5(/$). How much confidence do you have in your forecast?