International Macro & Policy Please upload a single PDF file of your problem set onto Canvas. Please don't send your problem set by email, don't upload formats that are not PDF, and don't upload multiple files. You will lose half of your grade if you don't follow these instructions. Thank you. 1. The 12-month nominal interest rate on the Indonesian rupiah is 8% and on the US dollar is 3%. The spot exchange rate is 9,200 rupiahs per US dollar. There is no risk premium. (a) Compute the expected rupiah/dollar exchange rate one year from now. Give an exact number. (b) The interest rate on the US dollar increases from 3% to 4%. The expected rupiah/dollar exchange rate does not change. What happens to the spot ru- piah/dollar exchange rate? Compute an exact number. Take (a) as a starting point for this question. () There is a change in market expectations: because of the weakening US economy, markets now expect the rupiah to depreciate by 1% less than previously thought. What happens to the spot rupiah/dollar exchange rate? Give an exact number. Take (a) as a starting point for this question. 2. The 12-month nominal interest rate on the euro is 4% and on the US dollar is 3%. The spot exchange rate is 1.45 dollars per euro. The risk premium on the euro is 1%. (a) What is the expected dollar/euro exchange rate 12 months from now? Give an exact number. (b) Because of the increasing indebtedness of the US, the dollar is losing some of its attractiveness, and the risk premium on the euro decreases to 0.5%. If the spot exchange rate does not change, what will happen to the 12-month interest on the euro? o0 3| Calendar To-do Notifications glnbox