1.The government can use direct intervention to influencing the value of the dollar by

a.imposing barriers on international trade.

b. increasing the inflation rate.

c. exchanging dollars for foreign currency.

d.lowering interest rates.

2.Points above the IRP line represent situations where:

a.covered interest arbitrage is feasible from the perspective of domestic investors and results in a yield above what is possible domestically

b.covered interest arbitrage is feasible from the perspective of foreign investors and results in a yield above what is possible in their local markets.

c. covered interest arbitrage is feasible from the perspective of domestic investors and results in the same yield as investing domestically.

d.covered interest arbitrage is not feasible for neither domestic nor foreign investors.

3.Which statement is considered adisadvantage of adopting a fixed exchange rate system:

a.Exporters are protected from expected currency depreciation.

b.Easier to manage a MNC.

c.The government may change the value of the currency.

d. Importers are protected from expected currency appreciation.

4.You are expecting that the Fed will be exchanging euros for U.S. dollars. You think you can speculate and make profit if you

a. sell U.S. Treasury bonds

b. purchase U.S. dollars today

c.purchase euro put options

d.purchase yen call options

5.La Verne Corp is a MNC based in La Verne California. The corporation decides to invest in a project in Russia. The Russian project will provide a 20% return while a similar project in the US will yield 10% return. Upon completion of the project, the corporation intended to convert both the principal and the profit gained to the US dollar. If the Russian Ruble depreciated 10%, we can conclude that La Verne Corp

a. made the right decision to invest in Russia

b.not enough information is given to answer the question

c. should be indifferent between investing inRussiaor the US

d. should have made a decision to invest in the US