1.) What is the rate of return realized by DEF on its investment in the Columbian Money Market?

a.) 16.0%

b.) 9.5%

c.) 18.7%

d.) 12.6%

2.) The Chief risk of such an investment strategy by DEF is:

a.) A severe increase in the value of the COP during the investment period

b.) A severe drop in the value of the COP during the investment period

c.) There is no risk in the strategy employed by DEF

d.) A severe weakening of the USD during the investment period

3.) One possible way for DEF to reduce the risk of the above strategy would be to:

a.) Sell USD forward one year at the time of the investment is made

b.) Sell COP forward one year at time the investment is made

c.) Engage in locational arbitrage after the investment is made

d.) Engage is triangular arbitrage at the time the investment is made

4.) Suppose DEF could earn 2% on a USD-denominated investment of the same risk level as the Columbian investment. Their strategy would prove beneficial provided the value of the COP does not ______ / USD during the investment period.

a.) Appreciate to 3155

b.) Appreciate to 2900

c.) Depreciate to 2750

d.) Depreciate to 3322