According to the International Fisher Effect, If U

question 33

Multiple Choice

According to the international Fisher effect, if U.S. investors expect a 5% rate of domestic inflation over one year, and a 2% rate of inflation in European countries that use the euro, and require a 3% real return on investments over one year, the nominal interest rate on one-year U.S. Treasury securities would be:

• A) 2%.
• B) 3%.
• C) -2%.
• D) 5%.
• E) 8%.

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