1. A cross-hedging strategy is most effective with currencies that are _____; currency diversification is most effective with currencies that are ______

a. highly negatively correlated; not highly correlated

b. expected to depreciate; expected to appreciate

c. highly positively correlated; not highly correlated

d. expected to appreciate; expected to depreciate

2. A firm evaluates all of its projects by applying the IRR rule. If the required return is 14 percent, should the firm accept the following project? Computer the IRR and answer if it should accept? If the company uses NPV and the required return is 13% should they accept the project?

Year 0 Cash Flow = -32,000

Year 1 Cash Flow= 13,000

Year 2 Cash Flow =19,000

Year 2 Cash Flow 12,000