If Both Interest Rate Parity and the International Fisher Effect

question 44

Multiple Choice

If both interest rate parity and the international Fisher effect hold, then between the forward rate and the spot rate, the ____ rate should provide more accurate forecasts for currencies in ____-inflation countries.

• A) spot; high
• B) spot; low
• C) forward; high
• D) forward; low

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Definitions:

Influencing Investee

An investment situation where the investor has significant influence over, but not control of, the financial and operating policies of another entity.

Available-for-sale Securities

Financial assets not classified as held-to-maturity or trading securities, which can be sold in response to liquidity needs or changes in interest rates.

Common Stock

A type of security that represents ownership in a corporation, granting holders voting rights and a share in the company's profits via dividends.

Accounting Record

Documented evidence of financial transactions, used to track, report, and audit financial movements.