QUESTION 1

1. As exchange rates change, they

   	A.	can affect imports and exports between those two countries.
   	B.	change the relative purchasing power between countries.
   	C.	will affect the flow of funds between the countries.
   	D.	All of the options are true.

1.82 points

QUESTION 2

1. The yield on a 1-year bill in the United Kingdom is 6%, and the present exchange rate is 1 pound = US$2. If you expect the exchange rate to be 1 pound = US$1.95 a year from now, the return a U.S. investor can expect to earn by investing in U.K. bills is approximately __________.

   	A.	8.72%
   	B.	-3%
   	C.	3.35%
   	D.	3%

1.82 points

QUESTION 3

1. The S&P 500 Index is currently at 2,500. You manage a $20 million indexed equity portfolio. The S&P 500 futures contract has a multiplier of $50. If T-bills pay 1.2% per six months and the semiannual dividend yield is 1.6%, what is the parity value of the futures price for a 1-year maturity contract ?

   	A.	4,080.03
   	B.	1,100.10
   	C.	2,480.04
   	D.	6,030.05

1.82 points

QUESTION 4

1. Suppose the initial margin requirement for the oil contract is 20%. Contract size is 1000 barrels. Current future price for march is $62.48. If the spot oil price at maturity date is 65.48, whats your return if you long the contract?