Question $5$

Sulsa Inc. uses fundamental forecasting. Using regression analysis, it has determined the

following equation for the euro:

euro ${?}_{(}()t),=b_0+\frac{b_1}{N}{F}_{t-1}+b_{2}IN{C}_{t-1}$

$=\mathrm{.}005+.\frac{9}{N}{F}_{t-1}+\frac{1\mathrm{.}1}{N}{C}_{t-1}$

The most recent quarterly percentage change in the inflation differential between the U$.$S$.$

and Europe was $2$ percent, while the most recent quarterly percentage change in the income

growth differential between the U$.$S$.$ and Europe was $-1$ percent. Based on this information,

the forecast for the euro is $a(n),$ of $\_\_\_\%.$

depreciation; $3\mathrm{.}4$

appreciation; $3\mathrm{.}4$

appreciation; $0\mathrm{.}7$

appreciation; $1\mathrm{.}2$