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Suppose you are trying to forecast the exchange rate of the Australian dollar for the next year as you have a business in Australia. The

Suppose you are trying to forecast the exchange rate of the Australian dollar for the next year as you have a business in Australia. The current spot rate is US$0.69/A$. The 1-year interest rate in Australia is 3.00%, and the 1-year interest rate in the U.S. is 1.00%. (a) What is the expected percentage change in the A$ exchange rate one year from now? Explain the intuition. (b) What would be the forecast for the exchange rate next year? You need to show your work so that full credits can be given. Only showing the final answer correctly will only earn you partial credits

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