If the Exchange Rate Follows a Random Walk

Multiple Choice

If the exchange rate follows a random walk

A) the future exchange rate is unpredictable.
B) the future exchange rate is expected to be the same as the current exchange rate,S_t = E(S_t + 1) .
C) the best predictor of future exchange rates is the forward rate F_t = E(S_t + 1/I_t) .
D) the future exchange rate is expected to be the same as the current exchange rate,S_t = E(S_t + 1) ,and the best predictor of future exchange rates is the forward rate F_t = E(S_t + 1/I_t) .