If the Forward Rate Was Expected to Be an Unbiased

question 8

Multiple Choice

If the forward rate was expected to be an unbiased estimate of the future spot rate, and interest rate parity holds, then:

• A) covered interest arbitrage is feasible.
• B) the international Fisher effect (IFE) is supported.
• C) the international Fisher effect (IFE) is refuted.
• D) the average absolute error from forecasting would equal zero.

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