If interest rates are higher in Italy than in the United States, the market expects that the Euro will: A. appreciate against the dollar. B. depreciate against the dollar. C. offer a higher real rate of return than the dollar. D. be selling at a forward discount.

A foreign manufacturer must make a $2 million payment to its U.S. supplier in 60 days. Which of the following is correct? A. The firm hopes that the U.S. dollar appreciates within the 60 days. B. The firm's exchange rate risk is hedged. C. The firm faces contractual exchange rate risk. D. The current spot exchange rate is likely to be trading at a premium.