1. Nils Air Compressor buys a put option on AUD (with a strike price of $1.50) for $.05 per unit. A put option represents 31,750 units. Assume that at the time of the purchase, the spot rate of the AUD is $1.51 and rises to $1.62 by expiration. The highest net profit possible for NAC based on the information above is:

-$675.00

$1,275.00

-$1,587.50

-$1,562.50

2. AndrewCO of Summit. NJ exports to a German firm and will receive a payment of 200,000 in three months. On June 1, the spot rate of the Euro was $1.12 and the 3-month forward rate was $1.11. On June 1, AndrewCO negotiated a forward contract with a investment bank to sell 200,000 forward in three months. The spot rate at September 1 is $1.15. AndrewCO will receive $________ for the euros.

252,000

218,000

225,000

222,000

3. A decrease in the U.S. money supply has no impact on the Canadian economy. TRUE OR FALSE

4. Assume that a bank's bid rate on INR is $71 and its ask rate is $73. Its best estimate of the bid-ask percentage spread is:

about 2.07%

about 3.26%

about 2.17%

about 2.74%

5. The real interest rate adjusts the nominal interest rate for:

exchange rate moves

income growth

inflation

government controls

6. A share of the ADR of a German firm represents one share of that firm's stock that is traded on the DAX. The share price of the firm was 15 euros when the DAX closed. As the U.S. market opens, the euro is worth $1.10. Thus, the price of the ADR should be ____.

16.50 euros

$15.00

$13.63

$16.50

7. Suppose that a "Terrible Towel" (the Pittsburgh Steelers good luck charm) costs $20.00 in Pittsburgh, and the USD/CAD exchange is 0.75. How many CAD does the Canadian contingent of Steelers fans need to buy a towel when they make a road trip to the "Steel City"?

$15.00

$22.50

$20.00

$26.67