Assume That the Interest Rate Offered on Pounds Is 5

Multiple Choice

Assume that the interest rate offered on pounds is 5 percent and the pound is expected to depreciate by 1.5 percent. For the international Fisher effect (IFE) to hold between the United Kingdom and the United States, the U.S. interest rate should be:

A) 3.43 percent.
B) 5.68 percent.
C) 6.5 percent.
D) 7.3 percent.