Good,inexpensive,and fairly reliable predictors of future exchange rates include
A)today's exchange rate.
B)current forward exchange rates (e.g.,the six-month forward rate is a pretty good predictor of the spot rate that will prevail six months from today).
C)esoteric fundamental models that take an econometrician to use and no one can explain.
D)today's exchange rate,as well as current forward exchange rates (e.g.the six-month forward rate is a pretty good predictor of the spot rate that will prevail six months from today).

Question

Quizplus · Accepted Answer

Today's exchange rate can give an indication of the current market sentiment, while forward exchange rates reflect the market's expectation of future spot rates. Therefore, combining both can provide a more accurate prediction of future exchange rates. Fundamental models may be complex and difficult to use, and may not always reflect current market conditions.

Good,inexpensive,and Fairly Reliable Predictors of Future Exchange Rates Include