Interest rate parity condition is one of the main pillars used in International Finance. Interest rate differentials among countries offer a good sense about whether a currency will appreciate or depreciate. Please mark the only INCORRECT statement regarding the forward premium or discount when we use European quotes.

	a.	If the interest rate in the USA is 1.00% and the interest rate in Brazil (currency: BRL) is 6.00%, then the BRL is trading at a forward discount
	b.	If the interest rate in the USA is 4.00% and the interest rate in Japan (currency: JPY) is 0.05%, then the JPY is trading at a forward premium
	c.	If the interest rate in the USA is 1.00% and the interest rate in Mexico (currency: MXN) is 6.00%, then the USD is trading at a forward premium
	d.	If the interest rate in the USA is 1.00% and the interest rate in Sweeden (currency: SKR) is 2.00%, then the SKR is trading at a forward premium in the forward market

Boris Excelcius is a master at using spreadsheets to price FX options. Currently, he is building a spreasheet for trading American EURUSD Call options.Please mark the only INCORRECT answer regarding FX Call PRICING:

	a.	The longer the time for expiration (one year instead of one month), the cheaper the Call
	b.	The interest rates in EUR and the USD will likely be included in Boris' valuation model
	c.	The more out of the money the call is (strike much higher than spot), the cheaper the call is likely to be
	d.	The higher the volatility for EURUSD the more expensive the premium of the call will be

Ann Rand is a currency trader at Summitone securities in Tokyo. She plans to (a) borrow 100,000,000 in Japan at 0.80% a year for one year and (b) invest the loan in Brazil where she can earn 5.00% a year in BRL for one year. Ann can convert JPY into BRL at 25.00 = R$1.00 today; and she expects that in one year from now the spot rate will be at 24.00 = R$1.00. Using these assumptions and parameters, please mark the correct answer:

	a.	She will profit 800,000 from the trade
	b.	She will lose 800,000 from the trade
	c.	This is the covered interest parity condition and she will break even
	d.	She will lose 7,200,000 from the trade