You are the manager at a U.S based firm that imports parts from Singapore. Your boss asked you to generate a forecast on the Singapore dollar for the next year to help him complete his capital budgeting report. Assume that the Singapore dollar is a free floating currency. You found the following information from the WSJ and the IMF web sites. Spot rate of Singapore dollar = $ 0.7861 IMF projected inflation in Singapore = 2.5% IMF projected inflation in U.S. = 2.1% 1. Based on the information that you found and assuming you believe Purchasing Power Parity (PPP) holds, what will be the value of the Singapore dollar in one year? What is the reasoning behind your answer? Explain the forces that cause the exchange rate to change in the direction you predicted. 2. You also read that the Central Bank of Singapore is considering direct intervention to influence the value of its currency in order to raise exports. What can the central bank do to reach their goal? How will this influence your forecast from