​Assume That the U

Multiple Choice

​Assume that the U.S. one-year interest rate is 5 percent and the one-year interest rate on euros is 8 percent. You have $100,000 to invest and you believe that the international Fisher effect (IFE) holds. The euro's spot exchange rate is $1.40. What will be the yield on your investment if you invest in euros?

A) ​8 percent
B) ​5 percent
C) ​3 percent
D) ​2.78 percent