Question 1 Which one of the following theories suggest that the price of an identical product should be same across the world? The Big Mac Index theory The exchange rate pass-through theory The absolute PPP (purchase power parity) The relative PPP (purchase power parity The International fisher effect Question 2 Which of the following statements is FALSE regarding dollarization? The dollarized country's central bank can no longer act as a lender of last resort The economy of the dollarized country is likely to be better integrated with the U.S. economy The dollarized country can no longer profit from the creation of money within its economy The dollarized country maintains control over its own monetary policy A country that dollarizes removes volatility of its currency against the U.S. dollar Question 3 As a U.S. currency trader, you are speculating on the Swiss franc when you Cover your position using currency options contracts Cover your position using outright forward contracts Cover your position using non-deliverable forward contracts Buy Swiss francs at the current spot rate and sell Swiss francs at the new spot rate a month later Cover your position using currency futures contracts Question 4 An interest payment by TD Bank of Canada to its U.S. bondholders will be recorded as a debit in the US, financial account credit in Canada's unilateral transfers account credit in the U.S.financial account debit in Canada's current account debit in the US current account Question 5 A put option on Japanese yen has a strike price of USD0.008000/JPY and a premium of USD.000090/JPY with an expiration date six months from now. The contract size is JPY 12,500,000. Calculate the value for the buyer when the yen spot price is USD0.007500/JPY (USD 1,125) USD 1.125 USD 5,125 (USD 6,412.50) (USD 9,712.50)