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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Definitions:

Red-Line

In finance, "red-line" or more commonly "redlining," refers to the unethical practice where banks refuse loans to neighborhoods based on racial or ethnic composition. If this term is meant in another context, it might not be a recognized key term.

DSO

Days Sales Outstanding, a measure of the average number of days it takes a company to collect payment after a sale has been made.

Credit Department

A division within a financial institution or company responsible for assessing credit risk and approving credit to customers.

Aging Schedule

An aging schedule is a table that shows the breakdown of accounts receivable into categories by length of time outstanding, often used to assess the collectibility of receivables.