May you please show work.

2. (20 points) (Ch. 9) Probability Distribution of Forecasts. Assume that the following regression model was applied to historical quarterly data: co= a + a,INT, + a,INF. +& where ea = percentage change in the JPYUSD exchange rate in period t INT, = interest rate differential between U.S. and Japan (ius-iJAP) over period t inflation differential between U.S. and Japan (lus-Isap) in the previous period aj, aj, az = regression coefficients & = error term INF1 Assume that the regression coefficients were estimated as follows: ao = 0.0, a=0.91, az = 0.65 Also, assume that the inflation differential in the most recent period was 2.5%. The interest rate differential in the upcoming period is forecasted as follows: (ius-iar) 0% 1 2 Probability 25% 40% 35% If IBM Corp. uses this information to forecast the Japanese yen's exchange rate, what will be the probability distribution of the yen's percentage change over the upcoming period? What is the weighted average expected spot rate JPYUSD movement in percentage? (20 points)