QUESTION 8 Which of these statements is not true? A The forward exchange rate is a good predictor of the future spot exchange rate. OB. The forward exchange rate and the future spot rate may not be the same. OC. The forward exchange rate is an unbiased predictor of the future exchange rate. OD. The spot exchange rate is a good predictor of the future exchange rate. OE. All of the above.

Q: An unbiased predictor of future exchange rates is a predictor that is almost always correct. True…

A: The prediction of future exchange rates plays a significant role in global financial markets and…

Q: 47

A: Interest rate parity states that the difference between the interest rate of two currencies would b…

Q: What is the concern for credit risk in anover the counter market versus the credit risk in an…

A: Over-the-counter (OTC) exchange is a decentralized form of the market. In this, two parties trade…

Q: One of the oldest debates in economics is whether a currency should have a fixed or floating…

A: Pegged(fixed) exchange rate: Such a system incorporates the aspects of both the systems i.e., fixed…

Q: What is interest rate swaptions, and what is the difference between a payer swaption and a receiver…

A: Swaptions is combination of two words. One is SWAP and other one is option.  Interest rate swaption…

Q: overed interest parity (CIP) refers to the situation in which:   a. interest rates are the same in…

A: Covered interest Parity refers to the correlation between interest rates of two currencies, spot and…

Q: Inflation rates and interest rates: O shift both demand and supply for a foreign currency at the…

A: Inflation rates and interest rates play a crucial role in shaping the dynamics of the foreign…

Q: When there are no trade costs, which of the following conditions exist? There is no arbitrage. The…

A: (i) Arbitrage exists due to differences  of prices in different markets. So If there are no trade…

Q: d. Forward contracts are not traded in any exchanges across the world.

A: Features of a forward contract include these of the above mentioned options: Forward contracts are…

Q: How is credit risk managed in case of foreign exchange futures contracts? Discuss with the use of an…

A: Credit risk management in foreign exchange (forex) futures contracts is a crucial aspect of…

Q: Which of the following statement is INCORRECT?

A: Option contract is a contractual agreement between the buyer and the seller. In the option…

Q: =) FALSE?

A: The exchange rate refers to the value of the one currency converted into the other currency. The…

Q: 3

A: Arbitrage is an investment strategy where traders simultaneously buys and sells an asset in…

Q: What are the differences between an exchange and an over-the counter market?

A: Over the counter market is customized market. Exchange is standardized.

Q: How can we obtain a pay-domestic-floating, receive-foreign-fixed currency swap by using a…

A: A currency swap is the exchange of interest (and occasionally principal) in one currency for the…

Q: Will US$/C$ futures exchange rate go up or down? 2. Will US$/C$ spot exchange rate go up or down?

A: The value of one country's currency in presented terms of the value of another country's currency is…

Q: A major risk faced by a swap dealer is exchange rate risk. This is   a)the probability exchange…

A: Exchange rate risk, also known as currency risk, is the financial risk posed by an exposure to…

Q: According to the efficient market school, do the best job at predicting future spot exchange rates.

A: Efficient market -It is such a market in which prices reflect all available market information.

Q: Explain with examples how to measure exchange rate risk for long positions and short positions Notes…

A: Forex (Forex or FX) is the trading of one currency against another. For example, you can exchange US…

Q: Short-run exposure to exchange rate risk is best illustrated by which one of the following?…

A: Exchange rate risk is the risk related to the uncertainty regarding the change in the price of a…