9) Suppose that the price level in Canada is CAD17,800, the price level in Italy is EUR13,000, and the spot exchange rate is CAD1.30/EUR. Which of the following statement is MOST likely to be true? A. The internal purchasing power of the Canadian Dollar is greater than its external purchasing power. B. Absolute purchasing power parity suggests that the Canadian Dollar is overvalued (relative to the Euro). C. Absolute purchasing power parity holds. D. Relative purchasing power parity suggests that the Euro is overvalued (relative to the Canadian Dollar). E. The implied exchange rate of CAD/EUR that satisfies absolute PPP is about 0.6742. 10) If both uncovered interest parity (UIP) and real interest parity (RIP) were to hold, then which of the following is LEAST likely to be true: A. Real interest rates are the same across different countries. Page 5 of 13 B. Expected change in future spot exchange rate is equal to nominal interest rate differential. C. Inflation differential is equal to nominal interest rate differential. D. Unbiasedness hypothesis does not necessarily hold. E. Current spot exchange rate is equal to the ratio of two price levels. 11) Which of the following statements regarding foreign currency futures and forward contracts is LEAST likely to be true? A. Futures contracts are standardised while forward contracts are customised. B. Comparing with forward contracts, futures contracts carry no or low default risk C. Investors taking a long position in futures contracts have to make a premium payment to the counterparty because they receive a privilege in the long position. D. Forward contracts require no explicit collateral while futures contracts require margins. E. Futures contracts are traded in exchange while forward contracts are traded over-thecounter.