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

question 19

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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