4.The current five year Euro yen rate is 6% per annum (compounded annually). The five year Eurodollar rate is 8.5%. What is the implied forward premium or discount of the yen (over the current spot rate) for a five year forward contract?

a)4.17% premium

b)18.46% discount

c)11.00% discount

d)12.36% premium

Ans:d

5. If annualized interest rates in the U.S. and Switzerland are 10% and 4%, respectively, and the 90day forward rate for the Swiss franc is $.3864, at what current spot rate will interest rate parity hold?

a)$.3902

b)$.3874

c)$.3807

d)$.3792

Ans:c

6. Suppose the Swiss franc revalues from $0.40 at the beginning of the year to $0.44 at the end of the year. U.S. inflation is 5% and Swiss inflation is 3% during the year. What is the real devaluation ( ) or real revaluation (+) of the Swiss franc during the year?

a)+ 7.9%

b)5.3%

c)+ 8.1%

d)1.6%

Ans:a

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