If you were attempting to forecast the forward exchange rate for a particular horizon such as 90 days, how would the forward exchange rate be an unbiased predictor of the future spot exchange rate?
What will be an ideal response?
Answer: If the forward exchange rate for 90 days is an unbiased predictor of the future spot rate, the forward rate is equal to the expected future spot rate. While there will be forecast errors that may be large, there will not be systematic errors on one side or the other. Therefore, the expected forward market return is zero.
Business
You might also like to view...
Fees collected by the Real Estate Commission are held:
A. By the Real Estate Commission members. B. In the Commissioner's personal checking account. C. In the General Fund of the state treasury. D. In an interest bearing trust account.
Business
A graph is considered one of which of the following?
A) illustrations B) figures C) tables D) pictures E) content
Business