If Interest Rates on the Euro Are Consistently Below U

question 27

Multiple Choice

If interest rates on the euro are consistently below U.S. interest rates, then for the international Fisher effect (IFE) to hold:​

• A) ​the value of the euro would often appreciate against the dollar.
• B) ​the value of the euro would often depreciate against the dollar.
• C) ​the value of the euro would remain constant most of the time.
• D) ​the value of the euro would appreciate in some periods and depreciate in other periods, but on average have a zero rate of appreciation.

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Definitions:

Ending Accounts Receivable

Ending accounts receivable is the amount of money owed to a company by its customers for goods or services delivered but not yet paid for at the end of an accounting period.

Maturity Date

The date on which the principal amount of a bond, loan, or other financial instrument becomes due and payable.

Amount Due

The total sum of money owed for goods or services provided, payable by a certain date.

90-Day Note

A short-term loan or promissory note that is due for repayment within 90 days.