Which of the Following Statements Regarding Nominal Exchange Rate Forecasts

question 10

Multiple Choice

Which of the following statements regarding nominal exchange rate forecasts is FALSE?

• A) Forward exchange rates perform better than spot exchange rates as the forecasting horizon is extended beyond one year.
• B) The current spot rate is a useful forecast of future exchange rates for horizons of up to one year.
• C) The variability of nominal exchange rates is large relative to forward premiums and discounts.
• D) The variability of nominal exchange rates is large relative to inflation differentials.
• E) The variability of forward premiums/discounts is large relative to interest rate differentials.

---

Definitions:

Hardball Tactics

Aggressive or forceful strategies used in negotiations or discussions to gain an advantage.

Bargaining Range

This term refers to the spread between the initial and final offer where negotiation is possible and both parties can find an acceptable agreement.

Resistance Points

The least favorable terms under which a party is willing to accept a negotiated agreement.

Public Pronouncement

An official statement or announcement made to the general public.