1. If annualized interest rates in the U.S. and Switzerland are 9% and 13%, respectively, and the spot value of the Swiss franc is $.1109, then at what 180-day forward rate will interest rate parity hold?

none of the answers

$.1150

$.1070

$.1088

2. A U.S. corporation has purchased currency put options to hedge a 100,000 Canadian dollar (C$) receivable. The premium is $.01 per unit of the underlying and the exercise price of the option is $.75. If the spot rate at the time of maturity is $.85, what is the net amount received by the corporation if it acts rationally, combining both the receivable and the option profit?

$74,000.

$84,000.

$75,000

$85,000.

3. Suppose PepsiCo hedges a 1 billion dividend it expects to receive from its Japanese subsidiary in 90 days with a forward contract. The current spot rate is 150/$1 and the 90day forward rate is 149/$1. If the spot rate in 90 days is 154/$, how much has this forward market hedge cost PepsiCo?

$44,743

$173,160

Pepsi gains $217,903 from the forward contract

Pepsi gains $173,160 from the forward contract

4. A call on euro with an exercise price of $1.35/euro has a premium of $0.05 per euro. If the spot rate at expiration is $1.34, then the net profit for the buyer of the call is

$+0.04 per euro

$ -0.05 per euro

$+0.05 per euro

$ -0.04 per euro

5. Assume the following information regarding U.S. and European annualized interest rates:

Currency	Lending Rate	Borrowing Rate
U.S. Dollar ($)	6.73%	7.20%
Euro ()	6.80%	7.28%

Trensor Bank can borrow either $20 million or 20 million. The current spot rate of the euro is $1.13. Furthermore, Trensor Bank expects the spot rate of the euro to be $1.10 in 90 days. What is Trensor Bank's dollar profit from speculating if the spot rate of the euro is indeed $1.10 in 90 days?

$583,800.

$584,245.

$588,200.

$579,845.