Use what you need of the following set of information to answer questions 1 through 10:

S₀ = $1.1138/ S₀ = 0.7620/$ S₀ = $1.3123/

E (S_{1 (3-months)}) = $1.0840/ F_3-months = $1.1580/

Where: = euro; = British pound; E( ) = Expected.

1. Is the euro expected to appreciate or depreciate in the coming three-month period against the U.S. dollar? Explain your answer in your own words without using any calculations. Now, calculate the expected rate of appreciation or depreciation in the value of the euro over the coming three-month period. Give your answer in percent with four decimal places.

2. Do you think there is anything off or not right about the three-month forward rate given above for the euro? If yes, what is off or wrong with it?