Jasper Pernik Is a Currency Speculator Who Enjoys "Betting" on Changes

question 81

Multiple Choice

Jasper Pernik is a currency speculator who enjoys "betting" on changes in the foreign currency exchange market. Currently the spot price for the Japanese yen is ¥129.87/$ and the 6-month forward rate is ¥128.53/$. Jasper thinks the yen will move to ¥128.00/$ in the next six months. If Jasper's expectations are correct, then he could profit in the forward market by ________ and then ________.

• A) buying yen for ¥128.00/$; selling yen at ¥128.53/$
• B) buying yen for ¥128.53/$; selling yen at ¥128.00/$
• C) There is not enough information to answer this question.
• D) He could not profit in the forward market.

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Definitions:

Exponential Smoothing

A time series forecasting method for univariate data that involves using weighted averages of past observations, with the weights decaying exponentially as the observations get older.

One-Period Ahead Forecasting

A forecasting method that predicts the value of a variable for the next period based on past and current data, often used in time series analysis.

Seasonal Components

Periodic fluctuations in data that occur at regular intervals due to seasonal factors.

Residual Plot

A graphical representation used in statistics to visualize the difference between observed and predicted values from a regression analysis.