On 29 March 2004, the €/$ exchange rate was €0.82/$ compared to €0.94/$ exactly one year before. On the same day, the £/$ exchange rate was £0.56/$ compared with £0.62/$ one year earlier.

1 Calculate the percentage appreciation of the euro against the dollar over the previous year.
Calculate the percentage appreciation of sterling against the dollar over the previous year.
(20 marks)

2 Calculate the percentage appreciation or depreciation of sterling against the euro over the previous year. Calculate the percentage appreciation or depreciation of the euro against sterling over the previous year. (20 marks)

3 Does the percentage appreciation or depreciation of sterling in (1) equal the euro depreciation or appreciation in (2) multiplied by negative one? Explain your answer. (20 marks)

4 Review the international parity conditions. Do you believe they work? Explain. (40 marks)