If the international Fisher effect (IFE) exists, then a U.S. firm that has acces

Question

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.

Explanation / Answer

c. invest in the U.S. deposits since they will, on average, generate similar effective yields as a foreign deposit

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