4) If the interest rate is higher than the one you were supposed to find in Question 3, then

A) You can make an arbitrage and your arbitrage strategy, among other things, will include borrowing money and buying a forward contract

B) You can make an arbitrage and your arbitrage strategy, among other things, will include borrowing money and selling a forward contract

C) You can make an arbitrage and your arbitrage strategy, among other things, will include investing money and buying a forward contract

D) You can make an arbitrage and your arbitrage strategy, among other things, will include investing money and selling a forward contract

E) You cannot make an arbitrage

5) If your borrowing rate is higher than the rate you were supposed to find in Question 3 while your investment rate is lower than the rate you were supposed to find in Question 3, then

A) You can make an arbitrage and your arbitrage strategy, among other things, will include borrowing money and buying a forward contract

B) You can make an arbitrage and your arbitrage strategy, among other things, will include borrowing money and selling a forward contract

C) You can make an arbitrage and your arbitrage strategy, among other things, will include investing money and buying a forward contract

D) You can make an arbitrage and your arbitrage strategy, among other things, will include investing money and selling a forward contract

E) Exactly two of the above answers are correct

F) You can make an arbitrage but none of the above answers are correct

G) You cannot make an arbitrage

9) Assume Rmax is the maximum pound interest rate you were supposed to find in question 8, while Rbor and Rinv are the actual investment and borrowing interest rates in the U.K. Assume you are a U.S. investor and consider dollars as money and pounds as a commodity. Which of the following statements are true:

A) If Rinv>R, then you can make an arbitrage using cash-and-carry strategy

B) If Rinv>R, then you can make an arbitrage using reverse cash-and-carry strategy

C) If Rborr>R, then you can make an arbitrage using cash-and-carry strategy

D) If Rborr>R, then you can make an arbitrage using reverse cash-and-carry strategy

E) At least two of the above statements are correct

10) When forwards with shorter maturity can be more expensive than forwards with longer maturity? Assume the underlying asset is a financial asset and there are no transaction costs

A) When short-term interest rates are lower than long-term interest rates and assets does not pay dividends

B) When short-term interest rates are higher than long-term interest rates and assets does not pay dividends

C) When the underlying asset pays dividends and the term structure of interest rates is flat

D) Both (A) and (C) are correct

E) Both (B) and (C) are correct

F) None of the above