When discussing exchange rate forecasting, the inefficient market school of thought would agree that Multiple Choice investing in forecasting services can improve the foreign exchange market's estimate of future exchange rates. forward exchange rates are the best possible predictors of future spot exchange rates. companies cannot beat the markets because forward rates reflect all available information about likely future changes in exchange rates. the foreign exchange market is efficient at setting forward rates, which are unbiased predictors of future spot rates. forward exchange rates represent market participants' collective predictions of likely spot exchange rates.
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- Which of the following is not an argument for central bank intervention? Exchange rates are highly volatile. Exchange rate fluctuations have an adverse effect on the macroeconomy. The market knows better than economic policy makers what the appropriate level of the exchange rate is. Central bank intervention can smooth out fluctuations in exchange rates.When discussing exchange rate forecasting, the inefficient market school of thought would agree that Multiple Choice O investing in forecasting services can improve the foreign exchange market's estimate of future exchange rates. О forward exchange rates are the best possible predictors of future spot exchange rates. О companies cannot beat the markets because forward rates reflect all available information about likely future changes in exchange rates. О the foreign exchange market is efficient at setting forward rates, which are unbiased predictors of future spot rates. О forward exchange rates represent market participants' collective predictions of likely spot exchange rates.Researchers found that it is very difficult to forecast future exchange rates more accurately than the forward exchange rate or the current spot exchange rate. How would you interpret this finding?
- Which of the following statements is CORRECT? Forward rate should provide more accurate forecasts for currencies in low-inflation countries than the spot rate. The technical forecasting is based on a wide range of data regarded as fundamental economic variables that determine exchange rates. In contrast, the fundamental forecasting focuses on a much smaller set of data, typically the historical exchange rates. O Technical forecasting model can reliably forecast long-run exchange rates. The spot rate is a useful Market-Based Forecast if the expected percentage change in the currency is zero over the forecast period. There are three main types of methods to forecast exchange rates: technical forecasting. fundamental forecasting, and market-based forecasting. These three methods always make the same directional prediction regarding whether a currency is appreciating orWhich of the following statements is (are) FALSE? Select one or more alternatives: Studies suggest that forward exchange rates are unbiased predictors for future spot exchange rates in internationally integrated capital markets. If arbitrageurs have sufficient capital to trade on risk-free opportunities instantaneously, we will see persistent deviations from covered interest parity. If both uncovered interest parity hypothesis and covered interest parity hypothesis hold, we can predict what the spot exchange rate will be in one year from today based on today's one-year forward exchange rate. If forward exchange rates deviate from synthetic forward rates defined by covered interest rate parity, there will be risk-free arbitrage opportunities in efficient capital markets.Exchange rates can move up or down, and spot rates could move favourably as well as adversely. However, many companies prefer to hedge their currency risks by fixing an exchange rate now for a future transaction, even if this means that it will not be able to benefit from any favourable future movement in the exchange rate. Required Discuss the methods of hedging exposures to foreign exchange risk.
- Once capital markets are integrated, it is difficult for a country to maintain a fixed exchange rate. Why? a. The market forces may be stronger than the exchange rate intervention that the govemment can muster. O b. Portfolio managers will not invest in countries with fixed exchange rates. c. Both a and b are correct. O d. None of the above.Which of the following is/are TRUE with respect to spot market liquidity? I. The market liquidity improves if more buyers and sellers willing to participate in the currency trading. II. The spot markets for heavily traded currencies such as the Euro and Pound are very liquid. III. A currency's liquidity affects the ease with which an MNC can obtain or sell that currency. IV. If a currency is illiquid, an MNC is typically able to quickly purchase that currency at a reasonable exchange rate. A. I, II, III B. I, III, IV C. II, III, IV D. I, IIDoes arbitrage destabilize foreign exchange markets? If yes, which argument do yousupport? offer your own opinion on this issue.
- For the statements below indicate if it is true or false. If the statement is false, rewrite so that it is a true statement. Use the space available to answer your question. 1. Foreign exchange markets are markets in which people of one country exchange goods with people from another country. TRUE/False: 2. When the actual foreign exchange rate for the dollar is greater than the equilibrium rate, the dollar is undervalued, meaning that it will buy less in international trade than it will buy at home. TRUE/False : 3. For any given interest rate, the shorter the time period before the receipt a dollar, the lower is its present value. TRUE/False :If a U.S.-based MNC focused completely on exporting, then its valuation would likely be adversely affected if most currencies were expected to appreciate against the dollar over time. Group of answer choices True FalseA price-taker in the foreign exchange market is a hedger who wants to avoid risk. a speculator who buys a currency at the current exchange rate, hoping that it will appreciate. a market participant who takes the current exchange rate to be the equilibrium exchange rate. a market participant who buys and sells currencies at the exchange rates quoted by large commercial banks.