questions QUESTION ONE (a) What are the fundamental differences between the theories of purchasing power parity and the interest rate parity. (8 Marks) (b) A bank in the USA can attract 3 months deposits by paying interest at 6%. It has to pay deposit insurance premium of 0.05% and the federal reserve requirement against the deposit would be 5%. Required: Determine the effective deposit cost on the funds. (4 Marks) (c) These financial instruments: forwards, swaps and options, are used to hedge against the exchange rate risk. Explain what these instruments entail. (12 Marks) (d) Write short notes on the following concepts of international trade; (i) Comparative advantage Absolute advantage (3 Marks) (3 Marks)