QUESTION 34

1. Assume a nominal interest rate on one-year U.S. Treasury Bills of 2.60% and a real rate of interest of 1.00%. Using the Fisher Effect Equation, what is the approximate expected rate of inflation in the U.S. over the next year?

1.00%

1.60%

2.10%

2.05%

2 points

QUESTION 35

1. Assume the current U.S. dollar-British spot rate is 0.6993/$. If the current nominal one-year interest rate in the U.S. is 5% and the comparable rate in Britain is 6%, what is the approximate forward exchange rate for 360 days?

a.	0.7060/$
b.	0.6993/$
c.	1.42/$
d.	1.43/$

2 points

QUESTION 36

1. A major U.S. multinational firm has forecast the euro/dollar rate to be 1.10/$ one year hence, and an exchange rate of $1.40 for the British pound () in the same time period. What does this imply the company's expected rate for the euro per pound to be in one year?

a.	1.54/
b.	1.40/
c.	1.54/
d.	1.40/