The Discrepancy Between the Forward Rate and the Expected Future

question 10

Multiple Choice

The discrepancy between the forward rate and the expected future spot rate due to the presence of a risk premium makes

• A) the forward rate a biased predictor of the future spot rate.
• B) the forward rate an unbiased predictor of the future spot rate.
• C) the foreign exchange market inefficient.
• D) Both A and C.

---

Definitions:

Disorganized-Disoriented

A classification in attachment theory, describing children who exhibit inconsistent and contradictory behavior in the presence of a primary caregiver.

Passive-Aggressive

A behavior pattern characterized by indirect resistance to the demands of others and an avoidance of direct confrontation, as in procrastinating, harboring secret feelings of resentment, or being sullen.

Avoidant

Pertaining to a behavior or personality style characterized by the avoidance of intimacy, social interaction, or confrontation.

Ambivalent

Having mixed feelings or contradictory ideas about something or someone.