1.Assume that the interest rate parity holds between the U.S. and England. Then the rate of return on the British (foreign) investment:

a.is negatively related to the U.S. interest rate.

b.is positively related to the expected dollar/pound exchange rate.

c.is negatively related to the British interest rate.

d.is negatively related to the expected dollar/pound exchange rate.

2.Suppose the exchange rate E$/ = 0.01172 today. This means you would need approximately

1,706.4 to buy $200 at this exchange rate.

a.False

b.True

3.Factors that determines import substitution FDI includes, the size of the host country's market, transportation cost and trade barriers.

a.False

b.True

4. If the British interest rate is 3 percent, E$/ = 1.6, while E^e= 1.45 (next year), then it isinadvisable to invest in a British certificate of deposit that will mature in a year's time.

a.False

b.True