Assume US and Swiss Investors Require a Real Rate of Return

question 22

Multiple Choice

Assume U.S. and Swiss investors require a real rate of return of 3%. Assume the nominal U.S. interest rate is 6% and the nominal Swiss rate is 4%. According to the international Fisher effect, the franc will ____ by about ____.

• A) appreciate; 3%
• B) appreciate; 1%
• C) depreciate; 3%
• D) depreciate; 2%
• E) appreciate; 2%

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Definitions:

Privately Held

A business ownership structure where the company’s shares are not traded on public stock exchanges and are typically owned by founders, management, or a private group.

Closely Held

A business that is privately owned, typically with a small number of shareholders, and not publicly traded on stock markets.

Shareholders

Individuals or entities that own one or more shares of stock in a public company, making them partial owners of that company.

IPO

Initial public offering. Stock in a new company offered to the public for the first time. Such stock tends to make a volatile, high-risk investment.