If the International Fisher Effect (IFE) Exists, Then a U

question 28

Multiple Choice

If the international Fisher effect (IFE) exists, then a U.S. firm that has access to banks offering high interest rates in deposits denominated in foreign currencies should:

• A) invest in the foreign deposits since they will, on average, generate higher effective yields than a U.S. deposit.
• B) invest in the U.S. deposits since they will, on average, generate higher effective yields than a foreign deposit.
• C) invest in the U.S. deposits since they will, on average, generate similar effective yields as a foreign deposit.
• D) invest in the foreign deposits since they will, on average, generate similar effective yields as a U.S. deposit.

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Definitions:

Culture

The complex system of meaning and behavior that defines the way of life for a given group or society.

Functions

are the intended or expected outcomes of social institutions, practices, or structures in society.

Elements of Culture

Fundamental aspects that constitute a culture, including beliefs, values, norms, symbols, language, and customs that shape the identity and social behavior of a group.

Functioning

The action of working or operating in a proper or particular way.