Assume US and Swiss Investors Require a Real Rate of Return

question 3

Multiple Choice

Assume U.S. and Swiss investors require a real rate of return of 3 percent. Assume the nominal U.S. interest rate is 6 percent and the nominal Swiss rate is 4 percent. According to the international Fisher effect, the Swiss franc will ____ by about ____.

• A) appreciate; 3 percent
• B) appreciate; 1 percent
• C) depreciate; 3 percent
• D) depreciate; 2 percent
• E) appreciate; 2 percent

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Definitions:

Cause-and-effect

A relationship between events or things, where one is the result of the other or others, demonstrating how different actions or events are linked.

Clarity of Message

The quality of being easily understood and free from ambiguity, crucial for effective communication in any medium.

Ambiguous Messages

Communications that can be interpreted in multiple ways due to unclear or vague language, leading to confusion or misunderstanding.

Redundancies

The presence of duplicate elements or unnecessary repetitions in content or processes.