Nominal Interest Rates in Cyprus Are 7%,while Nominal Interest Rates

question 36

Multiple Choice

Nominal interest rates in Cyprus are 7%,while nominal interest rates in the U.S.are 5%.The spot rate for the Cyprus pound (CYP) is $1.50.According to the international Fisher effect (IFE) ,the Cyprus pound should adjust to a new level of:

• A) $1.47.
• B) $1.53.
• C) $1.43.
• D) $1.57.

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Definitions:

Primacy Effect

The tendency to recall the first items in a sequence more readily than the middle items.

Overall Impression

The sum of thoughts, feelings, or attitudes someone forms about an entity (person, place, or thing) based on comprehensive or general observation.

Self-Serving Bias

The tendency to attribute one’s successes to dispositional causes and one’s failures to situational causes.

Dispositional Attribution

Attributing a behavior to some internal cause, such as a personal trait, motive, or attitude; an internal attribution.