The UK inflation rate is predicted to be 15% and the Euroland inflation rate is predicted to be 5%. The current Euro/ exchange rate is 1.60 Euros per pound. What is the expected Euro/ rate in one year's time according to PPP? (Show your workings in full) (5 marks) (ii) The $/ spot rate is $1.60/1. The UK interest rate is 4% and the US interest rate is 9%. Calculate the one year forward rate using the covered interest parity formula. (Show your workings in full). State if the pound is at a forward discount or at a forward premium. (5 marks)