1. The spot and 30day forward rates for the Dutch guilder are $0.3075 and $0.3110, respectively. The guilder is said to be selling at a forward

a) premium of 19.51%

b) premium of 17.56%

c) premium of 13.66%

d) discount of 13.66%

2. When an Italian student attends a US college, which of the following balance of payments entries occurs for the United States?

a) A service export

b) A good export

c) A capital flow

d) A direct investment

3. All of the following are appropriate response for a U.S. exporter to appreciation of the dollar EXCEPT?

a) raise the foreign currency price if the dollar appreciation was expected to be temporary and the cost of regaining market share was minimal

b) move some production offshore if the appreciation were expected to persist for an extended period

c) keep the foreign currency price constant if demand is highly elastic

d) keep the local currency price constant if demand is highly elastic

4. In a freely floating exchange rate system, if the current account is running a deficit

a) the balance of payments must run a deficit

b) the balance of payments must be zero

c) the capital account must run a surplus

d) b and c above