Question 26 One year interest rates are 2% in the US and 4% in the UK. The spot USD GBP rate is $1.39. What is the one year forward price? A. 1.3223 B. 1.3543 C. 1.3633 D. 1.4173 Question 27 The spot exchange rate between UK pound and the Indian Rupee is l=103 Rupee. The expected inflation rate in India is 10% while inflation in the UK is expected to be 5%. Which statement most accurately describes the exchange rates next year? A. The pound will certainly depreciate with respect to the Rupee B. The pound will certainly appreciate with respect to the Rupee C. The exchange rate will stay the same D. The pound may appreciate or depreciate with respect to the Rupee Question 28 Which one of the following is the advantage of futures contract compared to forward contracts? A. Futures can usually be tailored to users' exact requirements B. Futures can be used to trade any currency pair C. Trading futures is usually safer due to daily market marking D. None of the above Question 29 "I am worried that the pandemic will affect the value of our inflows in the long run What type of risk is the above statement associated with? A. Translation risk B. Economic risk C. Transaction risk D. Interest rate risk