Assume That the Interest Rate Offered on Pounds Is 5

question 26

Multiple Choice

Assume that the interest rate offered on pounds is 5% and the pound is expected to depreciate by 1.5%. For the international Fisher effect (IFE) to hold between the U.K. and the U.S., the U.S. interest rate should be ____.

• A) 3.43%
• B) 5.68%
• C) 6.5%
• D) 7.3%

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