Question One:

C

Question Two:

Annual rate: 10,000/(100,000-20,000) = 12.5%

Effective Annual Rate: (1+0.125/4)^4 -1 = 13.1%

Question 3:

             E(S foreign/$) = (1.025*0.7)/1.045

                                   = 0.687USD/$1NZD

Question 4:

The forward exchange should equal the expected spot exchange rate. This means the forward rate should be 0.9AUD/$1NZD

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