Question: show all working out please Question 4 (Total marks for this question = 6 marks) The one-year interest rate in Australia is given as 0.5%

show all working out please

Question 4 (Total marks for this question = 6 marks) The one-year interest rate in Australia is given as 0.5% and the one year interest rate in New Zealand is given as 1%. The spot rate of the New Zealand dollar is A$0.95. You will receive 10,000 New Zealand dollars in one year. (a) Using the international Fisher effect, calculate the expected change in the exchange rate for the New Zealand dollar. (3 marks) (b) Using your answer to (a), calculate the amount of Australian dollars you will receive when converting the New Zealand dollars to Australian dollars in one year at the spot rate at that time. (3 marks) Question 5 (Total marks for this question = 5 marks) You expect that the rate of inflation next year in Australia will be 3% and in the United States will be 2%. The spot rate of the Australian dollar is US$0.75. (a) Using purchasing power parity, calculate the expected change in the exchange rate for the Australian dollar. (3 marks) (b) Using your answer to (a), calculate the expected spot rate of the Australian dollar in one year. (2 marks) Question 6 (Total marks for this question = 6 marks) Suppose that there is parity between the Australian dollar and the United States dollar. Let x be a positive number and assume that the United States dollar increases by 100x % in Australian dollars. (a) Calculate the percentage decrease for one Australian dollar in United States dollars in terms of x. Simplify your answer. (4 marks) (b) Using your answer to (a), if the United States dollar increases by 10% in Australian dollars, calculate the percentage change for one Australian dollar in United States dollars. (2 marks) Question 7 (Total marks for this question = 10 marks) The Australian dollar was floated by the Australian Government in 1983. Explain, with reasons, whether you expect the value of the Australian dollar to increase or decrease against the United States dollar between the end of August, 2022, and the end of 2022. Remember to give references in your references list at the end of your assignment

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