D. Assume that the country Freeland engages in much trade with the United States and that...

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D. Assume that the country Freeland engages in much trade with the United States and that this trade involves many different products. Freeland has had a zero trade balance with the United States (the value of exports and imports is about the same) in the past. You expect high inflation (about 40 percent) in Freeland over the next year because of a large increase in the cost of land (and therefore housing) in Freeland. You believe that the prices of products that Freeland produces will not be affected. Freeland presently has a one-year risk-free interest rate of more than 40 percent. Do you think that the prevailing one-year forward rate of Freeland's currency (the fre) would overestimate, underestimate, or be a reasonably accurate forecast of the spot rate one year from now? (Presume a direct quotation of the exchange rate, so that if the forward rate underestimates the spot rate, it means that its value is less than the realized spot rate in one year. If the forward rate overestimates the spot rate, it means that its value is more than the realized snot rate in one year.) D. Assume that the country Freeland engages in much trade with the United States and that this trade involves many different products. Freeland has had a zero trade balance with the United States (the value of exports and imports is about the same) in the past. You expect high inflation (about 40 percent) in Freeland over the next year because of a large increase in the cost of land (and therefore housing) in Freeland. You believe that the prices of products that Freeland produces will not be affected. Freeland presently has a one-year risk-free interest rate of more than 40 percent. Do you think that the prevailing one-year forward rate of Freeland's currency (the fre) would overestimate, underestimate, or be a reasonably accurate forecast of the spot rate one year from now? (Presume a direct quotation of the exchange rate, so that if the forward rate underestimates the spot rate, it means that its value is less than the realized spot rate in one year. If the forward rate overestimates the spot rate, it means that its value is more than the realized snot rate in one year.)