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3. Please refer to the data below on exchange rates and interest rates for US, Europe, Japan, and UK, taken from Fl' for 2{22{21. a. Using this data, calculate the implied two-year ahead fonuard exchange rate between the dollar and the three other currencies, using Covered Interest Parity. (Notice that the tum-year rate is quoted on an annual basis, and in percentage tem1s.} b. Uncovered Interest Parity says that the fomard rate should be an unbiased estimate of the future exchange rate. According to this theory, which currencies are expected to appreciate against the dollar, and which to depreciate? c. In empirical fact, UIP seems not to hold, though there is not agreement on why not. Usually the low yielding currencies do not appreciate as much (relative to the high yielding currencies) as the relationship would lead you to expect. If you were a bank, how might you try to prot from this empirical failure, by writing loans in one currency and funding them in a different currency?| C u r rencie 5 European Japan United United Major cross Union Kingdom States rates EUR JPY GBP USD 1 GBP 1.1557 148.03 N/A 1.4023 1 EUR N/A 128.07 0.8650 1.2132 1 USD 5 0.8241 105.56 0.7129 N/A 1 AUD AS 0.6497 83.22 0.5621 0.7884 Bonds & rates Country 2-year yield Europe -0.68% Japan -0.11% United Kingdom 0.05% United States 0.11%