According to the international fisher effect, if investor purchases a 5 year U.s. bond that has an annual interest rate of 5% rather than a comparable British bond that has an annual interest rate of 6% then the investor must be expecting the _______ to _______ at a rate of at least 1% per year over 5 years.
a. british pound; appreciate
b. British pound; revalue
c. u.s.dollar; appreciate
d. us dollar; depreciate
Please show me how you get the answer, not just the answer