If the Forward Rate Was Expected to Be an Unbiased

question 66

Multiple Choice

If the forward rate was expected to be an unbiased estimate of the future spot rate, and interest rate parity holds, then:

• A) covered interest arbitrage is feasible.
• B) the international Fisher effect (IFE) is supported.
• C) the international Fisher effect (IFE) is refuted.
• D) the average absolute error from forecasting would equal zero.

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Definitions:

Internal Consistency Validity

A measure of whether items on a test are all assessing the same construct.

Interrater

An assessment of the degree to which different raters or observers give consistent estimates or judgments of the same phenomenon.

Parallel Forms

A method of reliability testing in which different versions of a test are administered to the same individuals at different times to measure consistency between the forms.

Test-Retest

A reliability measure to assess the consistency of a test over time by administering the same test to the same subjects at two different points in time.