Emma Wilson does not believe that the international Fisher effect (IFE) holds. Current one-year interest rates in Thailand are 12 percent, while one-year interest rates in the U.S. are 8 percent. Emma converts $100,000 to Thai baht and invests them in Thailand. One year later, she converts Thai baht back to dollars. The current spot rate of Thai baht is $0.0300. (Note that Thai baht is the official currency of Thailand.)

If the spot rate of Thai baht in one year is $0.0285, what is Emma's percentage return from her strategy?

13.68%

6.40%

2.60%

17.89%

What must the spot rate of Thai baht be in one year for Emma's strategy to be successful? (Round the answer to the 4 decimal places.)

As long as the spot rate is above $0.0311 per Thai baht, Emma's strategy can be successful.

As long as the spot rate is below $0.0289 per Thai baht, Emma's strategy can be successful.

As long as the spot rate is above $0.0289 per Thai baht, Emma's strategy can be successful.

As long as the spot rate is below $0.0311 per Thai baht, Emma's strategy can be successful.