1. Given the following data on 13th March 2007: Interest rate on 12-month German T-bills: 4% Interest rate on 12-month Japanese T-bills: 0.61% Spot exchange rate 1.00= Yen 154.2 (a) Making clear your assumptions, compute the market's expectation of the exchange rate on 13th March 2008. (b) If on 13th March 2007 you find a bank quoting a 12-month forward rate of 1.00= Yen 152.0, explain how you could profit by speculating. Show your calculations/workings