Consider the following information for the next 4 questions. The Galleon is the home currency at Hogwarts.

The spot dollar cost of 1 Galleon (GAL/USD) $2.7500

The risk free interest rate in the U.S 4%

The risk free rate at Hogwarts 9%

The spot dollar cost of one Ducat (DUC/USD) is $0.6000

7. If the interest rate parity theorem holds, then what should be the GAL/USD 2 year forward rate?

a. $2.3146

b. $2.4072

c. $2.5035

d. $2.6036

e. $2.7078

8. Suppose you have a project that will provide the following Galleon cash flows. Your cost of capital is 10%. Calculate the dollar NPV of the project.
Year	0	1	2
Galleon CF	-1000	800	600

a. $399.66

b. $423.64

c. $449.06

d. $476.00

e. $504.56

9. Bilbo Baggins, whose home currency is the Ducat, would like to purchase a wand at Hogwarts that costs 325 Galleons. How many Ducats will Bilbo pay?

a. 70.9

b. 893.8

c. 118.2

d. 1,489.6

e. 195.0

10. Bilbo starts off with 10,000 Ducats. He travels to the U.S., exchanges all of his Ducats for dollars and spends $1,400 on hotel and meals. He then travels to Hogwarts, exchanges his dollars for Galleons, and spends 1,200 Galleons on butterbeer, robes, food, and a cruise. He then returns home to the Shire and exchanges his Galleons for Ducats. How many Ducats does he have now?

a. 1,424.62

b. 1,638.31

c. 1,884.06

d. 2,166.67

e. 2,491.67