Chapter 9—Forecasting Exchange Rates

1. Which of the following forecasting techniques would best represent the use of today's forward

exchange rate to forecast the future exchange rate? a. fundamental forecasting.

b. market-based forecasting.

c. technical forecasting.

d. mixed forecasting.

ANS: B PTS: 1 2. Which of the following forecasting techniques would best represent sole use of today's spot exchange

rate of the euro to forecast the euro's future exchange rate? a. fundamental forecasting.

b. market-based forecasting.

c. technical forecasting.

d. mixed forecasting.

ANS: B PTS: 1 3. Which of the following forecasting techniques would best represent the use of relationships between

economic factors and exchange rate movements to forecast the future exchange rate?

a. fundamental forecasting.

b. market-based forecasting.

c. technical forecasting.

d. mixed forecasting.

ANS: A PTS: 1 4. Which of the following forecasting techniques would best represent the sole use of the pattern of

historical currency values of the euro to predict the euro's future currency value? a. fundamental forecasting. b. market-based forecasting.

c. technical forecasting.

d. mixed forecasting.

ANS: C PTS: 1 5. If a particular currency is consistently declining substantially over time, then a market-based forecast

will usually have: a. underestimated the future exchange rates over time.

b. overestimated the future exchange rates over time.

c. forecasted future exchange rates accurately.

d. forecasted future exchange rates inaccurately but without any bias toward consistent

underestimating or overestimating.

ANS: B PTS: 1 6. According to the text, the analysis of currencies forecasted with use of the forward rate suggests that:

a. currencies exhibited about the same mean forecast errors as a percent of the realized value.

b. the Canadian dollar can be forecasted by U.S. firms with greater accuracy than other

currencies.

c. the Swiss franc can be forecasted by U.S. firms with greater accuracy than other

currencies.

d. none of the above