1. The regression relationship between fp(t) and s(t+1) is estimated as: Et[s(t+1)] = 1% – 0.2 × fp(t) If the forward premium is 1% what is the expected rate of change in the spot rate?

A) 0.2% B) 0.8% C) 1.2% D) 1.8%

2. Over the last year the nominal revenues of a firm increased from $1 million to $ 1.2 million. The consumer price index increased over the same year by 8%. The rate of increase in the real revenue was approximately _____.

A) 6% B) 10% C) 12% D) 14%