(Please answer these three problems) (multiple choice answers give)

If the Japanese yen is expected to appreciate against the U.S. dollar and interest rates in the United States and Japan are similar, banks may try speculating on this anticipated exchange rate movement by borrowing ____ and investing in ____.

	a.	dollars; yen
	b.	yen; yen
	c.	yen; dollars
	d.	dollars; dollars

If a country experiences low inflation relative to the United States, its exports to the United States should ____, and there is ____ pressure on its currency's equilibrium value.

	a.	increase; downward
	b.	increase; upward
	c.	decrease; downward
	d.	decrease; upward

If a country experiences a reduction in interest rates relative to U.S. interest rates, and there is no change in inflationary conditions, that countrys investors will ____ their investments in U.S. securities, and there is ____ pressure on its currency's equilibrium value.

1. 	a.	decrease; upward
   	b.	increase; downward
   	c.	increase; upward
   	d.	decrease; downward

Assume the following information regarding U.S. and European annualized interest rates:

Currency	Lending Rate	Borrowing Rate
U.S. Dollar ($)	6.73%	7.20%
Euro ()	6.80%	7.28%

Trensor Bank can borrow either $20 million or 20 million. The current spot rate of the euro is $1.13. Furthermore, Trensor Bank expects the spot rate of the euro to be $1.10 in 90 days. What is Trensor Bank's dollar profit from speculating if the spot rate of the euro is indeed $1.10 in 90 days?

	a.	$584,245
	b.	$588,200
	c.	$579,845
	d.	$583,800