You should show your formulas and calculations to receive full credit. No steps for formulas and calculations, no credits. Q1. Due to the integrated nature of capital markets, investors in both the US and UK require the same real interest rate, 2.5% per annum, on their lending. There is a consensus in capital markets that the annual inflation rate is likely to be 3.5% in the U.S. and 1.5% in the U.K. for the next three years. The spot exchange rate is currently $1.50/. a. Compute the nominal interest rate per annum in both the S. and U.K., assuming that the Fisher effect holds. (6pts) b. What is the forward dollar-pound exchange rate for one-year maturity? (6pts) c. What is your expected future spot dollar-pound exchange rate in three years from now? (6 pts)