1. The direct spot quote for the Canadian dollar is US$.76 and the 180-day forward rate is US$.74. The difference between the two rates is likely to mean that
a) inflation in the U.S. during the past year was lower than in Canada
b) interest rates are rising faster in Canada than in the U.S.
c) prices in Canada are expected to rise more rapidly than in the U.S.
d) the Canadian dollar's spot rate is expected to rise in terms of the U.S. dollar
2. Suppose Lufthansa buys 10 Boeing 747s for $150 million in 1991, financed by a five-year loan from the US Export-Import Bank. There is a one year grace period on principal and interest payments. Which one of the following would NOT be one of the net impacts of this sale in 1991?
a) a $150 million reduction in the U.S. trade deficit
b) a $150 million reduction in the U.S. capital account surplus
c) a $150 million increase in the U.S. trade deficit
d) zero change in the U.S. balance of payments in 1991.