S$/: $1.20/ F$/: $1.08/ (one-year)

i : 0.00% (one-year) i$: 2.00% (one-year)

1. Suppose you are a U.S. investor and decide to make a covered investment of your dollars in Euro assets for one year. What is your percentage return measured in U.S. dollars?

a. -10.00%

b. -5.50%

c. 15.50%

d. 16.67%

2. Does the interest rate party hold?

a. Yes

b. No

3. Everything else equal, in which currency would you like to make an investment for one year?

a. In dollars.

b. In Euros.

c. Indifferent; they provide equal returns.

4. If the euro is a foreign currency for you and you have an A/R in euro. From a financial perspective, would you like to hedge your position with a straight forward or a synthetic forward?

a. Straight forward

b. Synthetic forward

5. At what forward rate does interest rate parity hold?

a. 1.2000/$

b. 1.2240/$

c. $1.3000/

d. $1.4300/