The expected inflation rate until the end of next year, 2021, is 3% in the US, and 16% inTurkey, respectively.The current spot exchange rate as ofDec 2, 2020, betweenTurkish Lira(TL) and the US dollar isTL 7.8526/$.(Source:https://www.wsj.com/market-data/currencies/exchangerates)

a.What will be the expected exchange rate betweenTurkish Lira (TL) and the US dollar at the end of 2021?

b.Explain why.

c.Which theory of the FX rate determination do you use for your forecasting as above?

d.Please find the history of the spot rates of TL/$ during the period of January 2000 - present, monthly rates in a graph. (One the information sources:https://fred.stlouisfed.org/series/CCUSMA02TRM618N)

e.Please explain what has been the trend of TL/$ rates during last 10 year period(appreciation or depreciation),and discuss whatdo you thinkare the most important factors which have affectedthe trend of the TL/$ rates.