Investors based in the U.S. can earn 11% interest on a one-year bank deposit in Argentina (with

Question:

Investors based in the U.S. can earn 11% interest on a one-year bank deposit in Argentina (with no default risk) or 2% on a one-year U.S. bank deposit in the U.S. (with no default risk). Assess the following statement: "According to the international (IFE), if U.S. investors invest 1000 Argentine pesos in an Argentine bank deposit, they are expected to receive only 20 pesos (2% x 1,000 pesos) as interest. " Is this statement a correct explanation of why the international would discourage U.S. investors from investing in Argentina? If not, provide a more accurate explanation for why investors who believe in IFE would not pursue the Argentine investment in this example.
Fisher Effect
The Fisher Effect is an economic theory created by economist Irving Fisher that describes the relationship between inflation and both real and nominal interest rates. The Fisher Effect states that the real interest rate equals the nominal interest...