15. If the interest rate in Canada is higher than it is in the U.S., the forward rate of Canadian dollar against US dollar will be at a forward discount. a) True b) False Answer: 16 If the spot rate CSS is 1.4050 and the US interest rate is 5% and Canadian interest rate is 6%, then oneyear equilibrium forward rate (CS/S) is a) 1.4184 b) 1.3917 c) 1.4250 d) 1.3858 Answer: 17. If you invest $100,000 in the British pound market for six months with a forward cover when the interest rate and exchange rates are as shown below, your anpualized rate of retum from the investment is 3%. Spot rate: $1.305060/Ft+6=$1.297590; ic =4.20% a) True b) False Answer: 18. Suppose the current spot rate for the C $ is $0.7427. A call option with the strike price of $0.7350 is said to be a) in the money b) out of the money c) at the money d) past breakeven Answer: 19 Suppose the current spot rate for the CS is $0.7427. The intrinsic value of a put option on CS with the strike price of 50.7400 is: a) $0.0027 b) $0.0027 c) $0.00 d) None of the above Answer: 20. You own a Canadian March 20 call option (size C $100,000 ) at the strike price $0.7340 for which you had paid a premium of $0.005. The spot rate today is $0.7500. Ignoring the interest cost on the premium, if you exercise the option today, your profit/loss is a. $1,600.00 b. $1,100.00 c. $1,600.00 c. None of the above Answer: 21. You own a Canadian March 20 put option (size C$100,000 at the strike price $0.7580 for which you had paid a premium of $0.005. The spot rate today is $0.7500. Ignoring the interest cost on the premium, if you exercise the option today, your profit/loss is a. $800.00 b. $1,100.00 c. $800 c. $300