Interest rate parity exists between the U$.$S$.$ and India as well as the U$.$S$.$ and Chile. The international Fisher effect exists between the U$.$S$.$ and India as well as the U$.$S$.$ and Chile. The official currency of India is the Indian rupee and the official currency of Colombia is the Chilean peso.

Aiden $($based in the U$.$S$.)$ invests in a one$-$year CD $($certificate of deposit$)$ in India and sells Indian rupee one year forward to cover his position.

Ellie $($based in India$)$ invests in a one$-$year CD in Chile and does not cover her position. $3.(3$ points$)$ Edward Jones, an international fund manager, uses the concepts of purchasing power parity $($PPP$)$ and the International Fisher Effect $($IFE$)$ to forecast spot exchange rates. Edward Jones gathers the financial information as follows:

Calculate the following exchange rates $($ZAR and USD refer to the South African rand and U$.$S$.$ dollar, respectively$).$ The interest rate given is the nominal interest rate.

a$.$ Using the IFE, the expected ZAR spot rate in USD one year from now. $(1$ point$)$

b$.$ Using PPP$,$ the expected ZAR spot rate in USD one year from now. $(1$ point$)$

c$.$ Using IRP $($interest rate parity$),$ the one year ZAR forward rate in USD. $(1$ point$)$

ANS: Please label $\backslash (\backslash$mathbf$\{$a$\}/\backslash$mathrm$\{$b$\}/\backslash$mathrm$\{$c$\}\backslash )$ in your response to the three sub$-$questions respectively.