1. Current Spot Rates. What are the current spot exchange rates for the following cross rates?

a. Japanese yen/U.S. dollar exchange rate

b. Japanese yen/Australian dollar exchange rate

c. Australian dollar/U.S. dollar exchange rate

2. Purchasing Power Parity Forecasts. Assuming purchasing power parity, and assuming that the forecasted change in consumer prices is a good proxy of predicted inflation, forecast the following cross rates:

a. Japanese yen/U.S. dollar in one year

b. Japanese yen/Australian dollar in one year

c. Australian dollar/U.S. dollar in one year

3. International Fischer Forecasts. Assuming International Fischer applies to the coming year, forecast the following future spot exchange rates using the government bond rates for the respective country currencies:

a. Japanese yen/U.S. dollar in one year

b. Japanese yen/Australian dollar in one year

c. Australian dollar/U.S. dollar in one year

4. Implied Real Interest Rates. If the nominal interest rate is the government bond rate, and the current change in consumer prices is used as expected inflation, calculate the "implied real rate of interest" (the nominal rate corrected for expected inflation) by currency.

a. Australian dollar "real" rate

b. Japanese yen "real" rate

c. U.S. dollar "real" rate

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Forecasting the Pan-Pacific Pyramid: Australia, Japan and The United States Gross Domestic Product Industrial Production Unemployment Rate Latest Qtr 4.3% 1.6% 1.9% 2007e 41% 20% 20% Recent Qtr 4.6% 3.8% -12% 3 8% 3.5% 1.9% 22% Latest 4.2% 3.8% 4.7% Unitod Statos 1.9% Consumer Prices Interest Rates 3-Month 1-Yr Govt Latest 6.23% 1.65% 4.54% Year Ago 40% 0.9% 2.1% Trade Balance Last 12 Mos (billion $) -13.0 Latest 2007e 24% 0.0% 2.8% 6.90% 0.73% 4.72% United States 2.8% Curent Account Current Units (per U.S.S) Last 12 Mos (billion $) -$47.0 $197.5 -$793.2 Forecast 07 (% of GOP) Oct 17h -67% 46% -5.6% Year Ago 1.33 119 1.00 1.12 98.1 United States -810.7 1.00