Good, Inexpensive, and Fairly Reliable Predictors of Future Exchange Rates

question 50

Multiple Choice

Good, inexpensive, and fairly reliable predictors of future exchange rates include

• A)today's exchange rate.
• B)current forward exchange rates (e.g. the six-month forward rate is a pretty good predictor of the spot rate that will prevail six months from today).
• C)esoteric fundamental models that take an econometrician to use and no one can explain.
• D)both a and b

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Definitions:

Interest Payable

The amount of interest expense that has been incurred but not yet paid by the company.

Callable Bonds

Bonds that can be redeemed by the issuer before their maturity date at a specified price.

Interest Accrual

The process by which interest is accumulated over time on borrowed funds, to be paid at a later date.

Redemption

The process of paying off or buying back a security, such as a bond, at its face value or at a specified price before maturity.