Assume that foreign exchange rates are totally unpredictable, as some theories and empirical studies claim, so that the best prediction of the future spot rate is the current spot rate.
a. Back in 1982, would you have suggested investing in U.S. dollar bills or in German bills?
b. What about in 1992?
c. What about in 1997?
(Look at Exhibit 3.1 of the fifth edition, knowing that inflation rates were similar in the two countries.)

Question

Quizplus · Accepted Answer

The Answer of Assume that foreign exchange rates are totally unpredictable, as some theories and empirical studies claim, so that the best prediction of the future spot rate is the current spot rate.
a. Back in 1982, would you have suggested investing in U.S. dollar bills or in German bills?
b. What about in 1992?
c. What about in 1997?
(Look at Exhibit 3.1 of the fifth edition, knowing that inflation rates were similar in the two countries.)

Assume That Foreign Exchange Rates Are Totally Unpredictable, as Some