If people expect the British pound to appreciate versus the dollar over the coming year, they will _____, and the pound will _____. The US dollar will _____ versus the British pound.

Question 6 options:

	sell pounds today, depreciate today, appreciate today
	buy pounds today, appreciate today, depreciate today
	sell pounds in a year, depreciate in a year, appreciate in a year
	buy pounds in a year, appreciate in a year, depreciate in a year

Suppose the president of the US announces a new set of reforms that includes a new anti-inflation program. Assuming the announcement is believed by the public, we can predict that the US dollar will:

Question 7 options:

	depreciate
	there is no way to tell
	appreciate
	not be affected

If nominal interest rates in the US rise while real interest rates fall, then we can predict that the US dollar exchange rate will:

Question 8 options:

	depreciate.
	appreciate.
	not change.
	repreciate.

Assume that the level of interest rates is about the same in the US and in the UK. You buy a British pound today at $1.10/pound and sell it after 1 year for $1.17/pound. In this case, you difference in return from holding pounds instead of dollars was a ___ of ___.

Question 9 options:

	loss, 6.36%
	gain, 6.36%
	loss, 7%
	gain, 7%