answer the highlighted questions

I need all the highlighted ones done

incred EXERCISES Pound to ant against both the ate against case is the The yen e euro at the yen differen- forward 1. Suppose you want to infer expected future exchange rates in a less developed country that has free-market-determined interest rates but does not have a forward exchange market. Is there any other way of inferring expected future exchange rates? Under what assumptions? 2. a. Show that there is a direct relationship between the forward premium and the "real" interest rate differential between two currencies. b. Under what conditions will the forward premium equal the expected "inflation" differential between two currencies? 3. Give four reasons why, when interest parity does not hold exactly, we are unable to take advantage of arbitrage to earn profits. 4. Suppose the 1-year interest rate on British pounds is 11%, the dollar interest rate is 6%, and the current $/4 spot rate is $1.80. a. What do you expect the spot rate to be in 1 year? b. Why can we not observe the expected future spot rate? 5. Assume that the 1-year interest rate in the United States is 2% and the 1-year interest rate in Sweden is 4%. Is there a premium or discount on the Swedish krona? 6. If two countries had identical term structures of interest rates, what is the expected future exchange rate change between the two currencies? the for- of the nuch as e other ne cur- and the incred EXERCISES Pound to ant against both the ate against case is the The yen e euro at the yen differen- forward 1. Suppose you want to infer expected future exchange rates in a less developed country that has free-market-determined interest rates but does not have a forward exchange market. Is there any other way of inferring expected future exchange rates? Under what assumptions? 2. a. Show that there is a direct relationship between the forward premium and the "real" interest rate differential between two currencies. b. Under what conditions will the forward premium equal the expected "inflation" differential between two currencies? 3. Give four reasons why, when interest parity does not hold exactly, we are unable to take advantage of arbitrage to earn profits. 4. Suppose the 1-year interest rate on British pounds is 11%, the dollar interest rate is 6%, and the current $/4 spot rate is $1.80. a. What do you expect the spot rate to be in 1 year? b. Why can we not observe the expected future spot rate? 5. Assume that the 1-year interest rate in the United States is 2% and the 1-year interest rate in Sweden is 4%. Is there a premium or discount on the Swedish krona? 6. If two countries had identical term structures of interest rates, what is the expected future exchange rate change between the two currencies? the for- of the nuch as e other ne cur- and the