When Discussing Exchange Rate Forecasting, the Inefficient Market School of Thought

question 44

Multiple Choice

When discussing exchange rate forecasting, the inefficient market school of thought would agree that

• A) forward exchange rates are the best possible predictors of future spot exchange rates.
• B) forward exchange rates represent market participants' collective predictions of likely spot exchange rates.
• C) companies cannot beat the markets because forward rates reflect all available information about likely future changes in exchange rates.
• D) investing in forecasting services can improve the foreign exchange market's estimate of future exchange rates.
• E) the foreign exchange market is efficient at setting forward rates, which are unbiased predictors of future spot rates.

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