If the Forward Exchange Rate Is an Unbiased Predictor of Future

question 36

True/False

If the forward exchange rate is an unbiased predictor of future spot rates, then future spot rates will always be equal to current forward rates.

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Definitions:

Interested Parties

Refers to individuals or groups that have a stake or interest in the outcome of a project, decision, or outcome.

Efficient Outcome

A situation in which resources are allocated in the most effective way possible, often achieved through market equilibrium where supply equals demand.

Government Intervention

Actions by a government to influence or directly manage an economy or specific sectors, aiming to correct market failures, stimulate economic growth, or achieve social objectives.

Externality Problems

Situations in economics where the actions of individuals or businesses have effects, either positive or negative, on unrelated third parties that are not reflected in the cost or benefit of the actions.