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Beth Miller does not believe that the International Fisher Effect holds. Current 1-year interest rates in Europe are 5%, while 1-year interest rates in the

Beth Miller does not believe that the International Fisher Effect holds. Current 1-year interest rates in Europe are 5%, while 1-year interest rates in the U.S. are 3%. Beth converts $100,000 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 $1.10.

According to the IFE, what should the spot rate of the euro be in 1 year?

If the spot rate of the euro in 1 year is $1.00, what is Beth's percentage return from her strategy?

If the spot rate of the euro in 1 year is $1.08, what is Beth's percentage return from her strategy?

What must the spot rate of the euro be in 1 year for Beth's strategy to be successful?

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