A) Explain the international Fisher effect (IFE). What is the rationale for the existence of the IFE? (2 marks)

B) Assume U.S. interest rates are generally above foreign interest rates. What does this suggest about the future strength or weakness of the dollar based on the IFE? Should U.S. investors invest in foreign securities if they believe in the IFE? Should foreign investors invest in U.S. securities if they believe in the IFE? (3 marks)