Current 1-Year Interest Rates Are 4% and 8% in the United

question 77

Multiple Choice

Current 1-year interest rates are 4% and 8% in the United States and Spain,respectively.The anticipated inflation in the United States is 2%.If the international Fisher effect holds,what is the expected inflation rate in Spain?

• A) 4.00%
• B) 4.04%
• C) 5.92%
• D) 6.00%

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Definitions:

Level of Significance

The probability of rejecting the null hypothesis in a statistical test when it is actually true; a measure of how unlikely results are due to chance.

Degrees of Freedom

The amount of free variables or measures that may change within an analysis while still adhering to all limitations.

T-statistic

A type of statistic used to estimate the significance of a difference between two sample means, given in terms of standard error.

Alpha

In statistical hypothesis testing, it represents the probability of committing a Type I error; the threshold significance level.