I. 8. Which of the following conditions must be met for absolute purchasing power parity to exist? No trade barriers can exist. II. Transaction costs must be zero. III. Forward exchange rates must be less than the spot rates. IV. The products must be identical. A) I and II only B) I and III only C) I, II and IV only D) I, III, and IV only E) I, II, III and IV 9- The theory that real interest rates across countries are equal is called A) the unbiased forward rates condition B) uncovered interest rate parity C) interest rate parity D) purchasing power parity I E) the International Fisher Effect I 10- If the spot exchange rate for the Euro is Euro 1 = $0.67. The six-month forward exch- rate is Euro 1 = $0.65. Based on these quotes, which of the following statements is we true? I. The Euro is selling at a discount relative to the dollar. II. The Euro is selling at a premium relative to the dollar. III. The dollar is selling at a discount relative to the Euro. IV. The dollar is selling at a premium relative to the Euro. A) I and III only B) I and IV only C) II and III only D) II and IV only E) None of the above Use the following to solve questions 11 and 12: Your company is looking at a new project in Mexico. The project will cost 8.5 million pesos. The cash flows are expected to be 2.05 million pesos per year for 4 years. The current spot exchange rate is 9.13 pesos per dollar. The risk-free rate in the US is 3% and the risk-free rate in Mexico is 6%. The dollar required return is 12%. (Use two decimal points in your calculations) 11-(2 points) What is the NPV of the project using the home currency approach? A) -$289,955.57 B) $294,684.82 C) -$393,147.56 D) -$397,261.39 E) None of the above