1. Find the price of a 1-year put option on1 with strike price of 1.7$/, if call option with the same strike price is selling for $0.20, U.S. interest rate is 8% and 1-year forward rate is 1.75$/

2. Find the U.K. interest rate if 1-year forward $/ exchange rate is 1.66$/, the spot exchange rate is 1.63$/, and interest rate in the U.S. is 5%

3. If U.S. interest rate is lower than U.K. interest rate, you can say that:

a) International Fisher Effect is wrong

b)RPPP is violated

c) PPP is violated by RPPP may be satisfied

d) USD is expected to appreciate

e) USD is expected to depreciate

f) None of the above

4. Can you make arbitrage if you have the following data: spot $/ bid-ask exchange rates are 1.64-1.66 $/; 1-year forward bid-ask exchange rates are 1.61 - 1.62$/; borrowing rate in the U.S. is 5% and investment rate in the U.S. is 4%; borrowing rate in the U.K. is 6% and investment rate in the U.K. is 5%? If arbitrage is possible, provide a possible strategy. If not, provide proof.

5. A few days ago you bought one put option for1 at strike price 1.7$/. The option's premium was $0.10 and, at that time, the strike price was 1.72$/. Today the strike price is 1.69$/. You can say that today your option is:

a) At the money

b) Around the money

c) Above the money

d) In the money

e) On the money

f) Under the money

g) Below the money

h) Out of the money