a. Could the forward market be efficient even if agents do not have rational expectations? b. If

Question:

a. Could the forward market be efficient even if agents do not have rational expectations?

b. If agents have rational expectations, does it follow that the forward rate must be an unbiased forecast of spot rate?

c. If agents are rational and the market is efficient, can you ever lose money?

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For book-img-for-question

Exchange Rates and International Finance

ISBN: 978-0273786047

6th edition

Authors: Laurence Copeland

See More Books

Question Posted: Apr 03, 2019 11:59 AM

See More Questions

Suppose that the private sector does not have rational expectations, but instead follows an adaptive expectations scheme. That is, the private sectors expected inflation rate is what the inflation...
The scene: John and Marsha hold hands in a cozy French restaurant in downtown Manhattan, several years before the mini-case in Chapter 9. Marsha is a futures-market trader. John manages a $250...
Multiple Choice Questions: 1. If expectations are rational? a. A predictable change in inflation can make the expected inflation rate deviate from the actual inflation rate. b. Unemployment can...
In Simpleland, there are only two risky assets in the market, A and B. The information and CAPM estimates of A and B are shown in the following table: A 100 Million 0.09 Market Capitalisation ($)...
The Electric Corporation, a publicly held corporation, owns land with a $1,600,000 basis that is being held for investment. The company is considering exchanging the land for two assets owned by the...
On March 1, Derby Corporation (a U.S.-based company) expects to order merchandise from a supplier in Norway in three months. On March 1, when the spot rate is $0.10 per Norwegian krone, Derby enters...
Why do projects have a time frame? AppendixLO1
Barkley Corp. obtained a trade name in January 2009, incurring legal costs of $15,000. The company amortizes the trade name over eight years. Barkley successfully defended its trade name in January...
How to find Subordinated debentures+Minority interest in consolidated (for suncorp bank australia)
In building new homes, a contractor finds that the probability of a home buyer selecting a two-car garage is 0.70 and of selecting a one-car garage is 0.20. Find the probability that the buyer will...
Can the markets expectation at t+2 of the exchange rate at t+N be less accurate than its expectation at t+1 of the exchange rate at t+N?
a) If the discovery of a new natural gas field in the Norwegian sector of the North Sea is announced on a Saturday night when the currency markets are more or less closed, would you expect the value...
RAF Inc. reported 2016 earnings per share of $3.20 and had no discontinued operations items. In 2017, EPS on income from continuing operations was $2.99, and EPS on net income was $3.49. Is this a...
Home Base, Incorporated reports the following production cost information: Units produced 97,000 units Units sold 92,000 units Ending finished goods inventory 5,000 units Direct labor $17 per unit...
About New York City public sector finance. The other way is to delineate the problem. We should use data to show a problem, and then analyze the environment in which budgeting takes place to suggest,...
From a survey a company has determined that 23% of its customers are classified as "advocates" , 68% as "passives" and the remainder as "detractors" . Research suggests that during a year 15% of the...
The following are the transactions of Spotlighter, Incorporated, for the month of January. a. Borrowed $3,940 from a local bank on a note due in six months. b. Received $4,630 cash from investors and...
1. What are the deeper problems that plague in different forms it takes throughout the world according to the authors? Please, briefly explain. 2. Why was Joseph Schumpeter a pessimist about the...
Why are crystals never spherical in shape?
Write a paper by answer the following question: Should Recycling Be Mandatory?
Distinguish between strategy decisions and operational decisions, illustrating for a local retailer.
In your own words, explain what customer equity means and why it is important.
Distinguish between a strategy, a marketing plan, and a marketing program, illustra t ing for a local retailer.
Only need help on 4B and 5. Exercise 9-21 Breakeven Planning; Profit Planning (LO 9-2, 9-3] Connelly Inc., a manufacturer of quality electric ice cream makers, has experienced a steady growth in...
A project with an initial cost of $32,000 is expected to provide cash flows of $12,900, $13,100, $16,200, and $10,700 over the next four years, respectively. If the required return is 8.1 percent,...
A company that is expecting to receive EUR 500,000 in 60 days is considering entering into an FX futures contract to lock an exchange rate to USD for the transaction. The FX rate on the contract is...

a. Could the forward market be efficient even if agents do not have rational expectations? b. If

Question:

Step by Step Answer:

a Yes but it has to be improbable For example suppose all agents were of two types those who were ov...View the full answer

Exchange Rates and International Finance

Students also viewed these Business questions