If home currency interest rate is 12%, foreign currency interest rate is 15%, inflation rate in home country 8% and inflation rate in foreign country 11% then the expected change in spot rate using International Fisher Effect is 2.68%.

True

False

A cross-hedging strategy is most effective with currencies that are _____, whereas currency diversification is most effective with currencies that are ______.

expected to depreciate; expected to appreciate

expected to appreciate; expected to depreciate

highly negatively correlated; not highly correlated

highly positively correlated; not highly correlated