$6.$ Identify the one true statement about hedging with futures: $($a$)$ The expiration dates of the futures contract always match those for the currency inflows$/$outflows that the contract is meant to hedge. $($b$)$ You can always find the futures contract on a currency which you wish to hedge. $($c$)$ Hedging with futures involves higher transaction costs than hedging with forwards. $($d$)$ A currency$-$mismatch can be hedged via a cross$-$hedge. $($e$)$ None of the above. $7.$ Identify the one true statement about $$swap contracts$$: $($a$)$ The first well$-$known swap contract was between two well$-$known commercial$$ banks. $($b$)$ To value an outstanding swap contract, one simply computes the present value of all future cash inflows and the present value of all future cash outflows. You do not need to convert the present values into the same currency. $($c$)$ A fixed$-$for$-$fixed currency swap may allow one to borrow in a foreign currency at a lower interest rate compared to directly borrowing in the foreign currency. $($d$)$ Swap rates are very different from risk$-$free rates. $($e$)$ None of the above $8.$ Identify the one true statement about the International Capital Asset Pricing Model $($also often denoted in our textbook by iCAPM$)$: $($a$)$ You should use the international CAPM when the markets are segmented. $($b$)$ In real$-$world situations, it is sensible to include the sensitivities of the stock return with respect to all foreign currencies in the iCAPM, even if this means that the model features the sensitivities to $($say$)100$ foreign currencies. $($c$)$ The iCAPM features sensitivities of a firm$$s stock return to foreign exchange rates, because home country equity investors do not care about wealth denominated in their home currency. $($d$)$ The valuation of an international investment project can be done in either FC or HC if the home country and the host country are part of one integrated financial market. $($e$)$ None of the above. $9.$ Identify the one false statement about current accounts: a$.$ The sale of computers of a UK company to a Swedish company is recorded in the merchandise account of the current account. b$.$ The source side of a deal tells us where the money in an international transaction was obtained. c$.$ The balance of payments has two categories: the current account and the capital and financial account. d$.$ The following transaction will not be recorded in the UK BOP: AstraZeneca AG$,$ the German subsidiary of a UK pharmaceutical firm, buys drugs from Merck Inc., a US pharmaceutical firm. e$.$ Securities bought internationally are a use of funds. $10.$ Identify the one true statement about $$marking$-$to$-$market$.$ a$.$ Forward contracts are always $$marked$-$to$-$market$.$ b$.$Marking$-$to$-$market$$ is a primitive version of daily re$-$contracting. c$.$ As $$marking$-$to$-$market$$ is a complicated process only feasible for large commercial banks, $$marking$-$to$-$market$$ reduces the volume of outstanding contracts. d$.$Marking$-$to$-$market$$ effectively implies that economic agents $($i$.$e$.,$ individuals or firms$)$ need to hold onto their $($say$)$ forward contracts until maturity. e$.$ When $$marking$-$to$-$market$$ is used, the buyer and seller of a forward contract make daily settlement payments directly into the counterparty$$s bank account.