Country X uses the dollar as its currency and country Y uses the dinar.

Country X’s expected inflation rate is 5% per year, compared to 2% per year in country Y. Country Y’s nominal interest rate is 4% per year and the current spot exchange rate between the two countries is 1·5000 dinar per $1.

According to the four-way equivalence model, which of the following statements is/are true?

(1) Country X’s nominal interest rate should be 7·06% per year

(2) The future (expected) spot rate after one year should be 1·4571 dinar per $1

(3) Country X’s real interest rate should be higher than that of country Y

A.1 only

B.1 and 2 only

C.2 and 3 only

D.1, 2 and 3

The current lottery craze in China has reached college campuses, where the promise of overnight wealth easily goes to the heads of some students. Some college students say they buy lottery tickets just for fun, others admit that they do have high hopes. What do you have to say to the second group of students if you object to their behavior? Write an essay of about 400 words to give you advice with your focus on why you think that way.

1. Does Life Depend on Sheer Luck?

In the first part of your writing you should present your thesis statement, and in the second part you should support the thesis statement with appropriate details. In the last part you should bring what you have written to a natural conclusion with a summary.

Marks will be awarded for content, organization, grammar and appropriacy. Failure to follow the above instructions may result in a loss of marks.

Write your composition on ANSWER SHEET FOUR.

Cancer has emerged as a major killer in several newly industrialized countries and is striking more people in areas of developing world where it was hardly known before, the World Health Organization(WHO)said. Although the risk of cancer will stabilize, if not decline, in industrialized countries by 2025, developing countries will suffer increasing rates of the disease, the WHO said in an extensive report on the worlds state of health. Cancer caused 12 percent of the 52 million deaths worldwide in 1997 and was the third leading killer after infectious and parasitic diseases and coronary and heart disease.

Sometimesperformanceismoreimportantthanavailability（e.g.，incaseswherethedatacanbeeasilyre-created）.Whichofthefollowingistheappropriatediskconfigurationforanapplicationthatrequiresfasterwritesoveravailability（）

A.RAID1

B.RAID6

C.RAID0+1

D.RAID0

Sometimesperformanceismoreimportantthanavailability（e.g.，incaseswherethedatacanbeeasilyre-created）.Whichofthefollowingistheappropriatediskconfigurationforanapplicationthatrequiresfasterwritesoveravailability？（）

A.RAID-1

B.RAID-5

C.RAID-0+1

D.RAID-0

The current dollar yield curve on the international bond market is flat at 6.5 percent for AAA-rated borrowers. A French company of AA standing can issue straight and plain vanilla FRN dollar bonds at the following conditions: ■ Bond A: Straight bond. Five-year straight-dollar bond with a semiannual coupon of 6.75 percent. ■ Bond B: Plain-vanilla FRN. Five-year dollar FRN with a semiannual coupon set at LIBOR plus 0.25 percent and a cap of 13 percent. The cap means that the coupon rate is limited at 13 percent, even if the LIBOR passes 12.75 percent. An investment banker proposes to the French company the option of issuing bull and/or bear FRNs at the following conditions: ■ Bond C: Bull FRN. Five-year FRN with a semiannual coupon set at 12.75 percent– LIBOR. ■ Bond D: Bear FRN. Five-year FRN with a semiannual coupon set at 2 × LIBOR - 6.5 percent. The coupons on the bull and bear FRNs cannot be negative. The coupon on the bear FRN is set with a cap of 19 percent. Assume that LIBOR can never be below 3.25 percent or above 12.75 percent. a. By comparing the net coupon per bond for the following combination to that of a straight Eurobond, show that it would be more attractive to the French company to issue the bull and/or bear FRNs than the straight Eurobond. i. Issue 2 bull FRNs + 1 bear FRN. ii. Issue 1 plain-vanilla FRN (bond B) + 1 bull FRN. b. By comparing the net coupon per bond for the combination of 1 straight bond (bond A) + 1 bear FRN, show that it would be more attractive to the French company to issue the bull and/or bear FRNs than the plain-vanilla FRN.