10.The nominal interest rate is 9 percent in Brazil and 6 percent in Japan. Appl

Question

10.The nominal interest rate is 9 percent in Brazil and 6 percent in Japan. Applying the international Fisher effect, the Brazilian real should:

A.         appreciate by 3 percent against the Japanese yen.

B.         depreciate by 3 percent against the Japanese yen.

C.         appreciate by 1.5 percent against the Japanese yen.

D.         depreciate by 1.5 percent against the Japanese yen.

11.Carry trade, a kind of speculation, takes advantage of the:

A.

temporary undervaluation of one currency vis-

A.         appreciate by 3 percent against the Japanese yen.

B.         depreciate by 3 percent against the Japanese yen.

C.         appreciate by 1.5 percent against the Japanese yen.

D.         depreciate by 1.5 percent against the Japanese yen.

Explanation / Answer

10. depreciate by 3 percent against the Japanese yen.

11. differences in interest rates between countries.

12 If a basket of goods costs $100 in the United States and

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