The effectiveness of the spot rate as a market based forecast relies on:
A) the validity of the covered interest parity hypothesis
B) the validity of the purchasing power parity hypothesis
C) the validity of the random walk hypothesis
D) the forward market efficiency

Question

Quizplus · Accepted Answer

The spot rate as a market-based forecast relies on the validity of the random walk hypothesis, which suggests that future spot rates are unpredictable and follow a random path, making the current spot rate the best unbiased predictor of future spot rates.

The Effectiveness of the Spot Rate as a Market Based