Question 1) On a foreign exchange diagram, the equilibrium exchange rate of USD/AUD is 0.90. If US demand for Australian beef increased, ceteris paribus, there would be excess _____ AUD and the USD would _____.

a. supply of, depreciate.

b. demand for, appreciate.

c. supply of, appreciate.

d. demand for, depreciate.

Question 2)

Identify the statement that correctly describes a Eurodollar deposit.

a. Eurodollar deposits tend to provide yields above nearly all marketable securities with similar maturities owing to the higher FX risk.

b. Eurodollar deposits tend to provide yields above nearly all marketable securities with similar maturities owing to the lack of a secondary market.

c. Eurodollar deposits tend to pay yields below all marketable securities with similar maturities owing to their low risk.

d. Eurodollar deposits are highly liquid and pay interest only at maturity; hence the yield is higher than on marketable securities.