1. Which ONE of the following is NOT a technique for evaluating and selecting projects from a pool of investment proposals?
a. Net Present Value b. Payback Period c. Replacement Investment d. Discounted Payback Period e. Internal Rate of Return
2. A currency dealer has good credit and can borrow either $1,000,000 or €800,000 for one year. The one-year inflation rate in the U.S. is π$ = 2.5% and in the euro zone the one-year inflation rate is π€ = 5.5%. The one-year forward exchange rate is $1.20 = €1.00; what must the spot rate be to eliminate arbitrage opportunities?
$1.2351 = €1.00
$1.2471 = €1.00
$1.1547 = €1.00
$1.0200 = €1.00