. Which example would be considered a Fisher effect? *

a. My partner is giving me a loan with interest rate being equal to his real required rate plus last year inflation rate

b. My partner is giving me a loan with interest rate being equal to his real required rate plus this year inflation rate

c. My partner is giving me a loan with interest rate being equal to his real required rate plus next year inflation rate

d. My partner is giving me a loan with interest rate being equal to his real required rate

e. None of the Above

2. A country's currency that strengthened relative to another country's currency by more than that justified by the differential in inflation is said to be ________ in terms of PPP. *

a. overvalued

b. over compensating

c. undervalued

d. under compensating

e. None of the above

3. A foreign currency ________ contract calls for the future delivery of a standard amount of foreign exchange at a fixed time, place, and price. *

a. futures

b. forward

c. option

d. swap

e. none of the above

4. The maximum profit that a writer of a call can make is *

a. unlimited if the option is in the money.

b. unlimited if the option is out of the money.

c. unlimited to the received premium.

d. none of the above

e. all of the above