TRUE/FALSE. Write 'T if the statement is true and F' if the statement is false 1) The forward exchange rate quoted today should be equal to the spot rate in the future. 2) The Eurodollar market is larger than any financial market in the United States 3) An indirect quote indicates the number of units of foreign currency that can be bought for one unit 2) 3) of the home currency 4) A quote of .7645 euros per dollar in New York is an example of a direct quote. 4) MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question 5) A British-made component costs 36 U.K. pounds. A company in the United States needs to buy 5) these components and the current indirect quote indicates that one dollar will buy 6250 pounds. Ignoring transactions costs, how much will one component cost in U.S. dollars? A) $22.50 B) $57.60 C) $45.94 D) $72.00 6) Assume that the British pound is worth 1.6242 U.S. dollars. If a new Jaguar costs $138,000, what is 6 the cost in British pounds? A) 119,998 B) 71,642 C) 84,965 D) 201,000 7) Suppose the 360-day forward exchange rate is 1.657 dollars per British pound, and the current spot 7) rate is 1.625 dollars per British pound. If the 360-day interest rate in the United States is 5% and the 360-day interest rate in Great Britain is 3%, is the market in equilibrium according to the interest rate parity theory? A) No, because the higher interest rate in the United States (2%) implies that the forward B) No, because the forward premium on the pound is 2% while the interest rate in the United C) Yes, because the forward premium on the pound (296) is exactly offset by the lower interest D) Cannot be determined without knowing the amount of money being exchanged exchange rate should be 2% lower than the current spot rate. States is 67% higher than the interest rate in Great Britain. rate in Great Britain