According to the International Fisher Effect, If an Investor Purchases

question 8

Multiple Choice

According to the international Fisher Effect, if an investor purchases a five-year U.S. bond that has an annual interest rate of 5% rather than a comparable British bond that has an annual interest rate of 6%, then the investor must be expecting the ________ to ________ at a rate of at least 1% per year over the next 5 years.

• A) British pound; appreciate
• B) British pound; revalue
• C) U.S. dollar; appreciate
• D) U.S. dollar; depreciate

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Definitions:

Criterion-related Validity

The extent to which a measure is related to an outcome, where the validity is determined by comparing the measure against a known criterion or benchmark.

Construct Validity

The extent to which a test or instrument accurately measures the theoretical construct it is intended to assess.

Reliability

The reliability and steadiness of outcomes produced by a measurement tool across multiple instances.

Aggregation

The process of combining multiple pieces or data points together to form a whole or summary measure.