Hi Sir/ Madam,

Could you please help me answer the 4 questions below? I need the correct answer, and if possible, a brief explanation. Thanks very much :)

1. Why in practice might an identical product not be able to be priced the same in two countries when taking account of the relative exchange rate?

a) ALL of the above most be true

b) Popularity of a product in a country

c) Transport costs.

d) Tariffs.

2. Which of the following is a factor in determining the quote rate for a forward exchange rate?

a) Relative inflation rates.

b) Market expectations.

c) Relative interest rates.

d) ALL of the above.

3. Which of the following is an assumption of market efficiency

a) At least all relevant publicly available information is quickly reflected in both spot and forward exchange markets.

b) ALL of the above.

c) Instruments denominated in other currencies are NOT always perfect substitutes for one another.

d) Transaction costs are usually low but sometimes can be significant.

4. According to International Fisher effect, if an investor purchases a fifteen-year U.S. bond that has an annual interest rate of 1% rather than a comparable German government bond that has an annual interest rate of 0.5% , then the investor must be expecting the __________ to _________ at a rate of at least 0.5% per year over the next 15 years.

a) U.S. dollar ; appreciate

b) U.S.dollar ; depreciate

c) Euro ; depreciate