QUESTION 1

1. A foreign exchange dealer has posted the following quotes. All the quotes are in FX/USD (US dollars per foreign currency). FX = Foreign Currency.

   	We buy	We sell
   Norway (NOK)	10.347	8.091
   Japan (YEN)	155.04	122.12
   Singapore (SGD)	2.28	1.75

   Given the information in this table which of the following statements are true? I. A 100 NOK hotel room will cost you roughly 9.66 USD. II. A 100 USD hotel room will cost a Singaporean about 228 SGD. III. The Singaporean dollar is stronger than the Norwegian krone.

   	A.	II
   	B.	III
   	C.	I
   	D.	None of the statements are true.
   	E.	I, II and III
   	F.	I and I

2. QUESTION 2

3. Fiat Automobiles S.p.A. thinks that there is a 50% probability that it may sell 50,000 cars to US importers in 2021. The cars are priced in USD. Fiat is concerned about how the volaility of the USD/EUR exchange rate will affect its Euro sales from this possible transaction. How should Fiat best hedge this exposure?

   	A.	Buy a put option on the Euro
   	B.	Buy a call option on the dollar
   	C.	Buy a put option on the dollar
   	D.	Go long a forward contract on the dollar
   	E.	Go short a forward contract on the dollar
   	F.	None of these alternatives will work