7) Which of the following statement(s) is/are true when IRP fails to hold? I. pressure from arbitrageurs should bring exchange rates and interest rates back into line. II. it may fail to hold due to transactions costs. III. it may be due to government-imposed capital controls. a) I only c) III only e) None of the above choices b) II only d) I, II & III 8) An investor believes that the price of a stock, say IBM's shares, will increase after 60 days. If the investor is correct, which combination of the following investment strategies will show a profit in all the choices? I. buy the stock and hold it for 60 days II. buy a put option III. sell (write) a call option IV. buy a call option V. sell (write) a put option a) II, III c) I, II & III e) III, IV, & V b) III, V d) I, IV, & V 9) Which of the following statements are false regarding future and forward contracts? I. As a seller of the future contract, you gain if the next-day (later) price decreases from the future agreed price. II. For forward contracts, there are daily settlements which reduce/eliminate counter party risks. III. Unlike options, parties in future and forward contracts are legally bounded to settle their positions, even if the positions are unprofitable. a) I only d) I and II only b) II only e) None of the above choices c) III only 7) Which of the following statement(s) is/are true when IRP fails to hold? I. pressure from arbitrageurs should bring exchange rates and interest rates back into line. II. it may fail to hold due to transactions costs. III. it may be due to government-imposed capital controls. a) I only c) III only e) None of the above choices b) II only d) I, II & III 8) An investor believes that the price of a stock, say IBM's shares, will increase after 60 days. If the investor is correct, which combination of the following investment strategies will show a profit in all the choices? I. buy the stock and hold it for 60 days II. buy a put option III. sell (write) a call option IV. buy a call option V. sell (write) a put option a) II, III c) I, II & III e) III, IV, & V b) III, V d) I, IV, & V 9) Which of the following statements are false regarding future and forward contracts? I. As a seller of the future contract, you gain if the next-day (later) price decreases from the future agreed price. II. For forward contracts, there are daily settlements which reduce/eliminate counter party risks. III. Unlike options, parties in future and forward contracts are legally bounded to settle their positions, even if the positions are unprofitable. a) I only d) I and II only b) II only e) None of the above choices c) III only