The Basis Theory in Using Spot Rates to Forecast Future

question 37

Multiple Choice

The basis theory in using spot rates to forecast future value of the currency is that:

• A)markets are notoriously unpredictable,so trying to determine what a currency will be worth in the future is unreliable and the current value of the currency is as good as any guess.
• B)over time,the spot rate of a currency determines the future value of the currency and it is easy and inexpensive to determine the spot rate of a currency.
• C)market participants are considered to all relevant information in their current trading,so all information that can affect the future value of a currency is already factored into the value of the currency.
• D)over time,the changes to the spot rate will be both positive and negative,so the spot rate,as somewhere near the average value of the currency over time,is a good estimation of the future value of the currency.

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