Prine Co (based in Italy) export shoes to Australian manufaturers. It invoices its product in EUR. And will not change it price over the next year. There is intense competition between prine and local shoe producers in Australia. Prine’s competition invoice their products is Australia Dollars and will not change their price over the next year. The annualized risk free interest rate is presently 2% in intaly, Vs 4.2% in australia. Today, the spot rate of the AUD is AU1.43/EUR 1. Prine co use this spot rate as a forcast of future exhange rate of the australia dollars. IF Prine decides to use the international fisher effect rather than the spot rate to forecate the exhange rate of the australian dollar over the next year. How will its expected revenue from its exports?
A. AUD Will depreciate by 2.16% and its expected revnue will higher.
B. AUD Will depreciate by 2.11% and its expected revnue will lower.
C. AUD Will appreciate by 2.16% and its expected revnue will higher.
D.AUD Will appreciate by 2.11% and its expected revnue will lower.
E. None above