If the Forward Rate Is Used as an Indicator of the Future

question 1

True/False

If the forward rate is used as an indicator of the future spot rate, the spot rate is expected to appreciate or depreciate by the same amount as the forward premium or discount, respectively.

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Definitions:

Continuous Probability Distribution

A function that describes the probability of a continuous random variable falling within a certain range of values.

Variance

A measure of variability that denotes the average of the squared differences from the mean, used in statistics to indicate how data points in a set are spread out.

Normal Distribution

A symmetrical bell-shaped distribution of data in which most of the values cluster around the mean.

Uniform Probability Distribution

A distribution in which all outcomes are equally likely to occur within a certain range.