The Fisher Effect States That

Multiple Choice

The Fisher effect states that

A) any forward premium or discount is equal to the expected change in the exchange rate.
B) any forward premium or discount is equal to the actual change in the exchange rate.
C) the nominal interest rate differential reflects the expected change in the exchange rate.
D) an increase (decrease) in the expected inflation rate in a country will cause a proportionate increase (decrease) in the interest rate in the country.