If the International Fisher Effect (IFE) Did Not Hold Based

question 35

Multiple Choice

If the international Fisher effect (IFE) did not hold based on historical data, this would suggest that:​

• A) ​some corporations with excess cash could lock in a guaranteed higher return on future foreign short-term investments.
• B) ​some corporations with excess cash could have generated profits on average from covered interest arbitrage.
• C) ​some corporations with excess cash could have generated higher profits on average from foreign short-term investments than from domestic short-term investments.
• D) ​most corporations that consistently invest in foreign short-term investments would have generated the same profits (on average) as from domestic short-term investments.

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