The following regression model was estimated to forecast the percentage change in the Australian Dollar (AUD): AUDt = a0 + a1INTt + a2INFt -1 + mt, Where AUD is the quarterly change in the Australian Dollar, INT is the real interest rate differential in period t between the U.S. and Australia, and INF is the inflation rate differential between the U.S. and Australia in the previous period. Regression results indicate coefficients of a0 = .001; a1 = -.8; and a2 = .5. Assume that INFt -1 = 4%. However, the interest rate differential is not known at the beginning of period t and must be estimated. You have developed the following probability distribution: \(\begin{array}{cc} \text { Probability } & \text { Possible Outcom } \\ 20 \% & -3 \% \\ 80 \% & -4 \% \end{array}\) There is a 20% probability that the Australian dollar will change by ____, and an 80% probability it will change by ____.

A) 4.5%; 6.1%; B) 6.1%; 4.5% C) 4.5%; 5.3% D) None of the above A) 4.5%; 6.1%; B) 6.1%; 4.5% C) 4.5%; 5.3% D) None of the above

Exam 9: Forecasting Exchange Rates

Which of the following forecasting techniques would best represent the use of relationships between economic factors and exchange rate movements to forecast the future exchange rate?

(Multiple Choice)

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Question 81

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

(Multiple Choice)

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Question 82

The following regression model was estimated to forecast the percentage change in the Australian Dollar (AUD): AUD_t = a₀ + a₁INTt + a₂INFt _-1 + m_t, Where AUD is the quarterly change in the Australian Dollar, INT is the real interest rate differential in period t between the U.S. and Australia, and INF is the inflation rate differential between the U.S. and Australia in the previous period. Regression results indicate coefficients of a₀ = .001; a₁ = -.8; and a₂ = .5. Assume that INFt _-1 = 4%. However, the interest rate differential is not known at the beginning of period t and must be estimated. You have developed the following probability distribution: Probability Possible Outcom 20\% -3\% 80\% -4\% There is a 20% probability that the Australian dollar will change by , and an 80% probability it will change by .

(Multiple Choice)

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Question 83

Which of the following is true?

(Multiple Choice)

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Question 84

Purchasing power parity is used in:

(Multiple Choice)

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Question 85

Small Corporation would like to forecast the value of the Cyprus pound (CYP) five years from now using forward rates. Unfortunately, Small is unable to obtain quotes for five-year forward contracts. However, Small observes that the five-year interest rate in the U.S. is 11%, while the Cyprus five-year interest rate is 15%. Based on this information, the Cyprus pound should by % over the next five years.

(Multiple Choice)

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Question 86

When measuring forecast performance of different currencies, it is often useful to adjust for their relative sizes. Thus, percentages rather than nominal amounts are often used to compute forecast errors.

(True/False)

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Question 87

The following is not a limitation of technical forecasting:

(Multiple Choice)

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Question 88

If the foreign exchange market is ____ efficient, then historical and current exchange rate information is not useful for forecasting exchange rate movements.

(Multiple Choice)

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Question 89

If speculators expect the spot rate of the yen in 60 days to be than the 60-day forward rate on the yen, they will the yen forward and put pressure on the yen's forward rate.

(Multiple Choice)

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Question 90

According to the text, research generally supports ____ in foreign exchange markets.

(Multiple Choice)

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Question 91

Inflation and interest rate differentials between the U.S. and foreign countries are examples of variables that could be used in fundamental forecasting.

(True/False)

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Question 92

The most sophisticated forecasting techniques provide consistently accurate forecasts.

(True/False)

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Question 93

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

(True/False)

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Question 94

Assume that U.S. interest rates are 6%, while British interest rates are 7%. If the international Fisher effect holds and is used to determine the future spot rate, the forecast would reflect an expectation of:

(Multiple Choice)

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Question 95

A fundamental forecast that uses multiple values of the influential factors is an example of:

(Multiple Choice)

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Question 96

Showing 81 - 96 of 96

Which of the following forecasting techniques would best represent the use of relationships between economic factors and exchange rate movements to forecast the future exchange rate?

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

Which of the following is true?

Purchasing power parity is used in:

When measuring forecast performance of different currencies, it is often useful to adjust for their relative sizes. Thus, percentages rather than nominal amounts are often used to compute forecast errors.

The following is not a limitation of technical forecasting:

If the foreign exchange market is ____ efficient, then historical and current exchange rate information is not useful for forecasting exchange rate movements.

If speculators expect the spot rate of the yen in 60 days to be than the 60-day forward rate on the yen, they will the yen forward and put pressure on the yen's forward rate.

According to the text, research generally supports ____ in foreign exchange markets.

Inflation and interest rate differentials between the U.S. and foreign countries are examples of variables that could be used in fundamental forecasting.

The most sophisticated forecasting techniques provide consistently accurate forecasts.

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

Assume that U.S. interest rates are 6%, while British interest rates are 7%. If the international Fisher effect holds and is used to determine the future spot rate, the forecast would reflect an expectation of:

A fundamental forecast that uses multiple values of the influential factors is an example of:

Multinational Financial Management: An Overview

International Flow of Funds

International Financial Markets

Exchange Rate Determination

Currency Derivatives

Government Influence on Exchange Rates

International Arbitrage and Interest Rate Parity

Relationships among Inflation, Interest Rates, and Exchange Rates

Measuring Exposure to Exchange Rate Fluctuations

Managing Transaction Exposure

Managing Economic Exposure and Translation Exposure

Direct Foreign Investment

Multinational Capital Budgeting

International Corporate Governance and Control

Country Risk Analysis

Multinational Cost of Capital and Capital Structure

Long-Term Debt Financing

Financing International Trade

Short-Term Financing

International Cash Management

Filters

Exam 9: Forecasting Exchange Rates

Which of the following forecasting techniques would best represent the use of relationships between economic factors and exchange rate movements to forecast the future exchange rate?

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

Which of the following is true?

Purchasing power parity is used in:

When measuring forecast performance of different currencies, it is often useful to adjust for their relative sizes. Thus, percentages rather than nominal amounts are often used to compute forecast errors.

The following is not a limitation of technical forecasting:

If the foreign exchange market is ____ efficient, then historical and current exchange rate information is not useful for forecasting exchange rate movements.

If speculators expect the spot rate of the yen in 60 days to be ____ than the 60-day forward rate on the yen, they will ____ the yen forward and put ____ pressure on the yen's forward rate.

According to the text, research generally supports ____ in foreign exchange markets.

Inflation and interest rate differentials between the U.S. and foreign countries are examples of variables that could be used in fundamental forecasting.

The most sophisticated forecasting techniques provide consistently accurate forecasts.

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

Assume that U.S. interest rates are 6%, while British interest rates are 7%. If the international Fisher effect holds and is used to determine the future spot rate, the forecast would reflect an expectation of:

A fundamental forecast that uses multiple values of the influential factors is an example of:

Multinational Financial Management: An Overview

International Flow of Funds

International Financial Markets

Exchange Rate Determination

Currency Derivatives

Government Influence on Exchange Rates

International Arbitrage and Interest Rate Parity

Relationships among Inflation, Interest Rates, and Exchange Rates

Measuring Exposure to Exchange Rate Fluctuations

Managing Transaction Exposure

Managing Economic Exposure and Translation Exposure

Direct Foreign Investment

Multinational Capital Budgeting

International Corporate Governance and Control

Country Risk Analysis

Multinational Cost of Capital and Capital Structure

Long-Term Debt Financing

Financing International Trade

Short-Term Financing

International Cash Management

Filters

If speculators expect the spot rate of the yen in 60 days to be than the 60-day forward rate on the yen, they will the yen forward and put pressure on the yen's forward rate.