1. 1. Which of the following is(are) correct description of an American Option?

1. It is only traded on the exchanges in the USA.
2. It can be exercised anytime from the date of issue to the maturity date.
3. It is always denominated in USD.

1. a). I only
2. b). II and III only
3. c). II only
4. d). I, II and III

3. 2). The one-year spot rate is 4% and the two-year spot rate is 6%. What is the forward rate for the second year?

1. a). 2.24%
2. b). 5.39%
3. c). 6.53%
4. d). 8.04%