Exam 9: Forecasting Exchange Rates

If a foreign country's interest rate is similar to the UK rate, the forward rate premium or discount will be ____, meaning that the forward rate and spot rate will provide ____ forecasts.

If the one-year forward rate for the dollar is 0.80 euro, while the current spot rate is 0.82 euro, the expected percentage change in the euro is ____% to the nearest percentage.

Two methods to assess exchange rate volatility are the volatility of historical exchange rate movements and the exchange rate's implied standard deviation from the currency option pricing model.

Corporations tend to make only limited use of technical forecasting because it typically focuses on the near future, which is not very helpful for developing corporate policies.

A motivation for forecasting exchange rate volatility is to obtain a range surrounding the forecast.

Which of the following is not a method of forecasting exchange rate volatility?

Which of the following forecasting techniques would best represent the sole use of the pattern of historical currency values of the euro to predict the euro's future currency value?

If both interest rate parity and the international Fisher effect hold, then between the forward rate and the spot rate, the ____ rate should provide more accurate forecasts for currencies in ____-inflation countries.

Usually, fundamental forecasting is used for short-term forecasts, while technical forecasting is used for longer-term forecasts.

Assume a forecasting model uses inflation differentials and interest rate differentials to forecast the exchange rate. Assume the regression coefficient of the interest rate differential variable is -0.5, and the coefficient of the inflation differential variable is 0.4. Which of the following is true?

Foreign exchange markets appear to be strong-form efficient.

Assume that the forward rate is used to forecast the spot rate. The forward rate of the Canadian dollar contains a 6% discount. Today's spot rate of the Canadian dollar is £0.61. The spot rate forecasted for one year ahead is:

If the forward rate was expected to be an unbiased estimate of the future spot rate, and interest rate parity holds, then:

Factors such as economic growth, inflation, and interest rates are an integral part of ____ forecasting.

Foreign exchange markets are generally found to be at least ____ efficient.

When the value from the prior period of an influential factor affects the forecast in the future period, this is an example of a:

Which of the following forecasting techniques would best represent the use of today's forward exchange rate to forecast the future exchange rate?

If foreign exchange markets are strong-form efficient, then all relevant public and private information is already reflected in today's exchange rates.

A forecasting technique based on fundamental relationships between economic variables and exchange rates, such as inflation, is referred to as technical forecasting.

Which of the following is true according to the text?