1)

Caps are used (by cap buyers) to hedge against (excessive) interest rate____________ because the cap seller compensates the cap buyer if interest rates _____________ the cap rate. Hence, buying a cap is equivalent to buying a ____________ on interest rates.

Group of answer choices

Increases; rise above; put option

Decreases; fall below; put option

Decreases; fall below; call option

Increases; rise above; call option

Increases; fall below; put option

2)

Which of the following statements are false?

I. In a firm commitment public offering, the security issuer bears the risk of a failed issue if the public does not want to buy the securities offered.

II. Private placements are exempt from SEC registration requirements.

III. A call writer has an unlimited potential loss but also an unlimited potential gain.

IV. Venture capital firms are generally not passive investors; they provide valuable expertise to the managers of the start-up firms they finance.

V. The balance of trade can impact currency exchange rates and vice versa.

Group of answer choices

III and V only

I and III only

I, II and V only

I, II, III and V only

II and IV only

2)

All else equal, if Japans inflation is lower than the U.S.s inflation, demand for goods will shift to ____________, pushing the demand for the _________ up. As a result, the yen will tend to _________ relative to the US dollar.

Group of answer choices

Japan; yens; depreciate

the U.S; U.S dollars; depreciate

Japan; the U.S dollars; appreciate

Japan; yens; appreciate

the U.S; yens; appreciate