Suppose the expected real interest rate in the United States is 9 percent per year while that in Europe is 3 percent per year.

(1) What do you expect to happen to the real dollar/euro exchange rate over the next year?

(2) Suppose the expected inflation rates are 5 percent per yearin the United States and 2 percent per year in Europe, respectively, what do you expect to happen to the nominal dollar/euroexchange rate over the next year?