Sally Franklin is a financial advisor to Jamie Curtess, a U.S. citizen interested in learning more about how her investments will be affected by exchange rates and differences in interest rates internationally. Franklin has gathered the following information based on Curtess’s investment interests.

The current spot exchange rate: is $1 = €0.74.

Europe United States

Nominal 1-year interest rate: 4%?

Expected annual inflation: 2% 1%

Franklin also gathers the following information:

Switzerland South Africa

Nominal 1-year interest rate: 5% 7%

Expected annual inflation: 3% 5%

Question: 

According to the international Fisher relation, what is the 1-year nominal interest rate in the United States?

Answer rating: 100% (QA)

Answer and Explanation The international Fisher relation states that the difference in nominal ... View the full answer