1) The interest-rate parity theorem states that:

A) Nominal interest rates decrease when inflation rates increase.

B) The exchange rate is equal to the market exchange rate.

C) A rise in the real interest rate will lead to a depreciation of currency.

D) As nominal foreign interest rates increase, the forward exchange rate in units of the foreign currency per dollar increases.

2) The three generally acknowledged theories regarding currency exchange rates suggest all of the following about high-inflation currencies except:

A) They usually trade at large forward discounts.

B) They will weaken over time.

C) Their interest rates will converge over time.

D) Their economies will have high interest rates.

3) The most likely adverse effect on a multinationals home country is

A) Flow of royalties and dividends out of the home country.

B) Manipulation of transfer prices.

C) Loss of technology.

D) Loss of tax revenues.

4) From the sellers perspective, what is the most risky form of payment used in international trade?

A) Letter of credit.

B) Open account.

C) Sight draft.

D) Time draft.