1. Which of the following statements regarding Internal Rate of Return (IRR) and Net Present Value (NPV) is/are most likely correct?

1: If the NPV and IRR methods give conflicting decisions for mutually exclusive projects, the IRR method should be used to select the project.
2: A project may have positive NPV even if its IRR is less than the cost of capital
3: IRR is the discount rate at which the NPV of the project is zero.
4: A project’s IRR can be positive even if the NPV is negative.

2. Which of the following statements is/are most likely correct?

I: The demand for a country’s currency is a downward-sloping function of its exchange rate.
II: Purchasing power parity refers to the relation between interest rates for two currencies and changes in their exchange rates.
III: Interest rate parity refers to the relation between countries’ inflation rates and exchange rates of their currencies.

3. Which of the following statements relating to Z-spread, Option-adjusted spread (OAS) and option cost for callable and putable bonds is/are most likely correct?

I: For callable bonds, Z-spread is greater than OAS and option cost is greater than 0
II: For callable bonds, Z-spread is less than OAS and option cost is greater than 0
III: For putable bonds, Z-spread is less than OAS and option cost is greater than 0

4. Keisha is looking to avoid purchasing power risk as much as possible. She should consider investing in which type of security?

5. The exchange rate between two currencies has decreased to 101.34. The price currency has appreciated by 7.5 percent against the base currency. The initial exchange between the two currencies was closest to: