The discrepancy between the forward rate and the expected future spot rate due to the presence of a risk premium makes
A) the forward rate a biased predictor of the future spot rate.
B) the forward rate an unbiased predictor of the future spot rate.
C) the foreign exchange market inefficient.
D) Both A and C.
Correct Answer:
Verified
Q1: is the spending of domestic firms for
Q2: International investment is motivated by considerations.
A) risk
Q3: Foreign exchange risk may be hedged and
Q5: An unbiased forward rate
A) is one that
Q6: If an investor prefers less risk to
Q7: In an efficient foreign exchange market, an
Q8: The variance that can be eliminated through
Q9: Which one is not a concept of
Q10: Buying currency for future delivery implies that
Q11: The difference between the forward rate and
Unlock this Answer For Free Now!
View this answer and more for free by performing one of the following actions
Scan the QR code to install the App and get 2 free unlocks
Unlock quizzes for free by uploading documents