1. Using the pure expectations approach to the determination of interest rates, calculate the expected (E) rate of interest of a one-year investment that will be available in 12 months' time (1i1), given the following data:
Current rate of return on a one-year-to-maturity (0i1) instrument is 7.75% per annum and for a two-year maturity (0i2) instrument is 8.25% per annum
1) 7.75% per annum
2) 8.25% per annum
3) 8.75% per annum
4) 9.25% per annum
2. International cash management is more complex than domestic based cash management because of:
A. The risk involved in currency fluctuation
B. The changing interest rates across countries
C. Varying time zones across countries
D. All of the above.