1.         Does international exposure increase or decrease the overall risk for multinational corporations?  Briefly explain.

2.         Briefly describe risks faced by multinational corporations.

3.         If the US is currently running a large current account deficit, what must be happening in the other two capital accounts?   Would the US government be losing international reserves?

4.         Why can the US run large current account deficits, while having a strong economy, and a country like Mexico cannot?

5.            Compute the forward discount or premium for the British pound whose 180-day forward rate is $1.65 and the spot rate is $1.70.  State whether your answer is a premium or discount.

6.         What is the function of the currency forward markets?

7.         Show and explain what would happen to the value of the yen if the US raises short-term interest rates relative to Japan.  Use a supply and demand diagram.

8.         List and briefly explain the main factors which could change the value of the Euro relative to the dollar.

9.         If you believe that the value of the mark was going to increase, explain how you could profit using options and futures.  What is the risk/reward relationship with both?

10.       Show the contingency graph at expiration of the following put option:

            Exercise price =            $1.60 per pound
Premium =                  $   .035
Units in contract =            62,500

             What is the break-even point for the buyer and seller of this option?

11.       If a US speculator sold the Japanese yen at 105 yen per dollar and later purchased the yen at 110 yen per dollar, what percentage loss or gain did they make on the transaction?