The following regression model was estimated to forecast the value of the Malaysian ringgit (MYR):
MYR(t) = a0 + a1INC(t-1) + a2INF(t-1) + mu(t),
where MYR is the quarterly change in the ringgit, INF is the previous quarterly percentage change in the inflation differential, and INC is the previous quarterly percentage change in the income growth differential. Regression results indicate coefficients of a0 = .005; a1 = .4; and a2 = .7. The most recent quarterly percentage change in the inflation differential is -5%, while the most recent quarterly percentage change in the income differential is 3%. Using this information, find the forecast for the percentage change in the ringgit. Do not write any symbol. Express your answers as a percentage. Make sure to round your answers to the nearest 100th percentage point. For example, write 10.34 for10.34% .
10-Silicon Co. has forecasted the Canadian dollar for the most recent period to be $0.73. The realized value of the Canadian dollar in the most recent period was $0.80. Thus, find the absolute forecast error as a percentage of the realized value.
11-If the one-year forward rate for the euro is $1.07, while the current spot rate is $1.05. Find the expected percentage change in the euro after one year. Do not write any symbol. Express your answers as a percentage. Make sure to round your answers to the nearest 100th percentage points.
