1. Assume the annual British interest rate is above the annual U.S. interest rate. Also assume the pound's forward rate of $1.75 equals the pound's spot rate. Given this information, interest rate parity ____ exist, and the U.S. firm ____ lock in a lower financing cost by borrowing pounds for one year.
a. does; could
b. does; could not
c. does not; could not
d. does not; could
2. Consider an exporter that sells its accounts receivables to another firm that becomes responsible for obtaining payment from the various importers. This reflects:
a. accounts receivable financing.
b. consignment.
c. factoring.
d. a letter of credit.