Assume That U

question 63

Multiple Choice

Assume that U.S. interest rates are 6%, while British interest rates are 7%. If the international Fisher effect holds and is used to determine the future spot rate, the forecast would reflect an expectation of:

• A) appreciation of pound's value over the next year.
• B) depreciation of pound's value over the next year.
• C) no change in pound's value over the next year.
• D) not enough information to answer this question.