From the corporate viewpoint, use of technical forecasting may be limited in that it

a. Rarely provides good points estimates.

b. Rarely provides a range of possible future values.

c. Focuses on the near term.

d. All of these choices are correct.

You are the manager of a large U.S.-based MNC. A member of the Chilean government, a good friend of yours, has just contacted you to inform you that the Chilean central bank will raise interest rates next week. If youcannotuse this information to improve your forecast of the Chilean peso, then the foreign exchange market for the Chilean peso is probably________ efficient.

a. Strong-form

b. Weak-form

c. Semistrong-form

d. All of these choices are correct.

Displayed below is the perfect forecast line for Currency X:

Which of the following statements is incorrect?

a. Point A has overestimated Currency X.

b. Point A has underestimated Currency X.

c. [Point A has overestimated Currency X.] and [Point B has underestimated Currency X.] are incorrect.

d. All points on the perfect forecast line have estimated Currency X perfectly.

e. Point B has underestimated Currency X.

Forecasting services often emphasize fundamental forecasting for short-term forecasts and technical forecasting for long-term forecasts.

a. True

b. False

Because no single forecasting technique has been found to be consistently superior to the others, some MNCs may prefer to use a combination of forecasting techniques; that is, they prefer to use mixed forecasting.

a. True

b. False

Scenario analysis refers to the consideration of more than one possible outcome for a factor used in fundamental forecasting.

a. True

b. False

Forecasting future exchange rates may be useful for hedging, investment, and financing decisions of an MNC.

a. True

b. False

Which of the following is not true regarding fundamental forecasting?

a. Regression analysis is frequently used in fundamental forecasting to estimate the relationship between exchange rate movements and certain fundamental variables.

b. Some factors may have an instantaneous impact on exchange rates and must therefore be estimated.

c. Fundamental forecasting refers to the use of fundamental relationships between economic variables and exchange rates to forecast future exchange rates.

d. Fundamental forecasting has frequently outperformed other forecasting techniques, such as technical and market-based forecasting, in past periods.