The Discrepancy Between the Forward Rate and the Expected Future

question 22

True/False

The discrepancy between the forward rate and the expected future spot rate due to the presence of a risk premium implies that the foreign exchange market is not efficient.

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Definitions:

Capital

Financial assets or the financial value of assets, such as cash and goods, used by a business to produce goods or services and create wealth.

Future Benefits

Expected advantages or gains in the future, often considered in decision-making processes or investment analysis.

Retained Earnings

Profits that a company keeps after dividends have been paid out to shareholders, used for reinvestment in the business or to pay down debt.

Capital

Resources made and used by people to produce and distribute goods and services; includes tools, machinery, and buildings.