1. Atreides International has operations in Arrakis. The balance sheet for this division in Arrakeen solaris shows assets of 17,000 solaris, debt in the amount of 7,500 solaris, and equity of 9,500 solaris.

If the current exchange ratio is 2.1 solaris per dollar, what does the balance sheet look like in dollars?

Balance sheet:

• Assets = $8,095.24; Debt = $3,571.43; Equity = $4,523.81
• Assets = $35,700.00; Debt = $15,750.00; Equity = $19,950.00
• Assets = $8,500.00; Debt = $3,750.00; Equity = $4,750.00
• Assets = $7,690.48; Debt = $3,392.86; Equity = $4,297.62
• Assets = $8,419.05; Debt = $3,714.29; Equity = $4,704.76

Assume that one year from now the balance sheet in solaris is exactly the same as at the beginning of the year. If the exchange rate is 2.3 solaris per dollar, what does the balance sheet look like in dollars now?

Balance sheet:

• Assets = $7,391.30; Debt = $3,260.87; Equity = $4,130.43
• Assets = $39,100.00; Debt = $17,250.00; Equity = $21,850.00
• Assets = $7,760.87; Debt = $3,423.91; Equity = $4,336.96
• Assets = $7,021.74; Debt = $3,097.83; Equity = $3,923.91
• Assets = $7,686.96; Debt = $3,391.30; Equity = $4,295.65

2

Suppose interest rate parity holds, and the current six-month risk-free rate in the United States is 4.6 percent.

What must the six-month risk-free rate be in Great Britain?

Great Britain risk-free rate:

• 5.94%
• 6.03%
• 3.27%
• 7.18%
• 5.71%

What must the six-month risk-free rate be in Japan?

Japanese risk-free rate:

• 3.44%
• 3.42%
• 5.76%
• 3.60%
• (3.57)%

What must the six-month risk-free rate be in Switzerland?

Swiss risk-free rate:

• 4.47%
• 3.47%
• 4.73%
• 4.65%
• 5.29%

U.K. Pound 6-months forward () Japan Yen 6-months forward () Switzerland Franc 6-months forward (SF) Currency per U.S. $ 0.5135 0.5204 108.21 106.96 1.0492 1.0478