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1. Which of the following is correct?

a. The longer the time to maturity, the lower the value of a currency put option, other things being equal.

b. The lower the exercise price relative to the spot rate, the greater the value of a currency call option, other things being equal.

c. The longer the time to maturity, the lower the value of a currency call option, other things being equal.

d. The higher the spot rate relative to the exercise price, the greater the value of a currency put option, other things being equal. 2. A call option on Japanese yen has a strike (exercise) price of $.012. The present exchange rate is $.011. This call option can be referred to as: a. in the money. b. out of the money. c. at a discount. d. at the money. 3.Which of the following is not true regarding the Mexican peso crisis? a. The central bank of Mexico increased interest rates after the peso declined in value in order to prevent investors from withdrawing their investments in Mexico's debt securities. b. All of the above are true. c. In December of 1994, the central bank of Mexico allowed the peso to float freely. d. Many speculators based in the U.S. speculated on the potential decline in the peso by investing their funds in Mexico.

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