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Find what should the spot rate of the euro in one year be

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Beth Miller does not believe that the international Fisher effect (IFE) holds. Current one-year interest rates in Europe are 8 percent, while one-year interest rates in the United States are 6 percent. Beth converts $80,000 to euros and invests them in Germany. One year later, she converts the euros back to dollars. The current spot rate of the euro is $1.12.

Question 1: According to the IFE, what should the spot rate of the euro in one year be? Do not round intermediate calculations. Round your answer to three decimal places.

Question 2: If the spot rate of the euro in one year is $1.00, what is Beth's percentage return from her strategy? Use a minus sign to enter a negative value, if any. Round your answer to two decimal places.

Question 3: If the spot rate of the euro in one year is $1.11, what is Beth's percentage return from her strategy? Use a minus sign to enter a negative value, if any. Round your answer to two decimal places.

Question 4: What must the spot rate of the euro be in one year for Beth's strategy to be successful? Do not round intermediate calculations. Round your answer to three decimal places.

Question 5: Beth's strategy would be successful if the spot rate of the euro in one year is than

Reference no: EM132708327

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