Please answer the following questions:

1.

Which of the following option contracts would be useful for hedging forecasted foreign currency costs?

Buying a Put Option

Buying a Call Option

Buying a forward

Selling a forward

2. In an option contract, the buyer of the option, and also person from whom the buyer buys the option, both have the option to walk away from the contract

True

False

3.

Which of the following is the most actively traded currency?

Japanese Yen (JPY) since Japan is a) an open economy, b) one of the worlds largest economies, and (c) is situated in the high growth Asia region where international trade is booming

US dollar (USD) since the US is worlds largest economy and is worlds largest reserve currency

British pound (GBP) since London was the first major financial hub for international commerce and continues to have a significant role today

Euro (EUR) since it covers many countries and thereby has a wide geographic reach

4.

he Optimum Currency Area theory of Professor Robert Mundell, Columbia University, says that the most relevant criteria for defining a common currency zone is which of the following?

		Strong system of law within the zone
		Well defined and effective boarders around the zone
		High degree of factor (i.e., capital and labor) mobility within the zone
		Strong economic growth (i.e., high GDP growth) within the zone