1. The Bear Co. is a UK subsidiary of the Street Co, a US based MNC. The Bull company is a Germany-based co., and is also a subsidiary of the Street Co. Bear owes EUR20,000 to Bull; Bull owes Street GBP10,000. The exchange rate is EUR1.20=GBP1.00. Through bilateral netting, instead of two transfers of funds, a single transfer of_______________ is made from Bull to Bear.

A. GBP30,000

B. EUR30,000

C. EUR20,000

D. GBP20,000

2. A US firm exports to the UK. Unfortunately for the firm, the is expected to depreciate by 10% versus the $. The firm employs a full pass-through strategy. Accordingly, it will:

A. lower its prices by 10%

B. keep its prices the same

C. raise its prices by 10%

D. Raise its prices by 100%

3. In imperfectly integrated financial markets

A.Real risk-adjusted returns are always higher than those of integrated markets

B. There are no real risk-adjusted returns, since markets are not fully integrated.

C.The real risk-adjusted returns are always lower than those of integrated markets

D.Real risk-adjusted returns expected to prevail in each country and currency should be equal

E. None of the above