Engagement 4

3. An option whose exercise price is the same as the spot price of he underlying currency
4. The agreed upon rate of exchange within an option contract
6. The potential exposure any individual firm bears that the second party to any financial contract may be unable to fulfill its obligations under the contract's specifications
9. A position in which foreign currency assets exceed foreign currency liabilities
10. A theory that nominal interest rates in two or more countries should be equal to the required real rate of return to investors

1. The difference between spot and forward rates, expressed as an annual percentage, also known as the forward discount
2. The possibility that political events in a particular country will influence the economic well-being of firms in that country
5. The theory that provides the link between the foreign exchange markets and the international money markets
7. The size of a derivative contract, in total currency value, as used in futures contracts, forward contracts, option contracts, or swap agreements
8. The process by which investors borrow in countries and currencies exhibiting relatively low interest rates