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1. According to the international fisher effect:

A. exchange rates adjust to compensate for income differntials between countries.

b. interest rates adjust to compensate for income differentials between countries.

c. exchange rate adjust to compensate for interest rate differntials between countries.

d. exchange rates adjust to compensate for risk differntials between countreis.

E. none of the above

2. if interest rate parity does not hold and the forward premium exceeds the interest rate differential, foreign financing with a simultaneous forward purchase of the currency borrowed will result in an effective financing rate that is ___?

Lower than the domestic interest rate

Higher than the domestic interest rate

Similar to the domestic interest rate

Highly variable

None of the above

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92749079

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