1. What is the difference between foreign direct investment and portfolio investment? (13 points)
2. What is the purchasing power parity exchange rate? (13 points)
3. If a country's currency is expected to appreciate in value, what is the impact of expected exchange rates on the interest rate paid on government bonds? (12 points)
4. Would each of the following groups be happy or unhappy if the U.S. dollar appreciated? Explain.
   1. Dutch pension funds holding U.S. government bonds (2 points)
   2. U.S. manufacturing industries (2 points)
   3. Australian tourists planning a trip to the United States (2 points)
   4. An American firm trying to purchase property overseas (2 points)