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Joan Smith does not believe that international Fisher effect (IFE) holds. Current one-year interest rate in Europe is 5 % while one-year interest rate in the US is 10 %. Joan converts $100,000 to euros and invests them in France. One year later, she coverts Euros back to dollars. The current spot rate of euro is $1.08.

If the spot rate of the euro in one year is $1.12, what is Joan's percentage return from her strategy?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92766407

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