The happens after the asset allocation decision is made.

The spot rate is nothing more than all of the forward rates multiplied together taken to the nth root. While the calculation appears more difficult than it actually is, there are a number of areas that can potentially trap some candidates. For example, each spot rate needs to be annualized and needs to be divided by two in order to get the effective period rate. Also, after all of the forward rates have been multiplied by each other (being sure to add "1" to each rate before multiplying) it is important to take the nth root (depending on the number of periods) and to subtract "1" afterwards. The detailed calculation is shown below:
(((((1+0.040728/2) 2 x (1+0.0535/2))(1/3))-1) x 2 = 0.044977.
(Note: If the candidate would prefer to see the number in "percentage" form it is necessary to multiply by
"200" rather than by "2")

Under LCM, the lower of cost or market is used. In this case, cost ($80) is lower than market
($82).

The presence of substitutes for a good raises the elasticity of the good. This is because under a price increase for tomatoes, consumers will switch to other vegetables that are now relatively lower priced. There are few good substitutes for salt and therefore the price elasticity of salt is much lower than that for tomatoes.

The VER allows the quota rent resulting from the decrease in trade to be captured by the exporter. For B, government revenue actually falls. For C the result is mixed as it depends on whether the quota rents are captured by the importing country through sale of licenses or by the exporters.