If the Forward Rate Is an Unbiased Predictor of the Expected

question 56

Multiple Choice

If the forward rate is an unbiased predictor of the expected spot rate, which of the following is NOT true?

• A) The expected value of the future spot rate at time 2 equals the present forward rate for time 2 delivery, available now.
• B) The distribution of possible actual spot rates in the future is centered on the forward rate.
• C) The future spot rate will actually be equal to what the forward rate predicts.
• D) All of the above are true.

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