1,Which statement is considered adisadvantage of adopting a fixed exchange rate system:

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

b.Exporters are protected from expected currency depreciation.

c.Easier to manage a MNC.

d.Importers are protected from expected currency appreciation.

2,Assume the following information:

Spot rate today of Swiss franc

=

$.60

1-year forward rate as of today for Swiss franc

=

$.63

Expected spot rate 1 year from now

=

$.64

Rate on 1-year deposits denominated in Swiss francs

=

7%

Rate on 1-year deposits denominated in U.S. dollars

=

9%

From the perspective of U.S. investors with $1,000,000, covered interest arbitrage would yield a rate of return of ____%.

a.15.50

b.5.00

c.12.35

d.14.13

3,Points above the IRP line represent situations where:

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

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 a yield above what is possible domestically

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