Market efficiency will hold if:
A) the forward rate is an unbiased and efficient forecaster of the spot exchange rate
B) if the forward rate equals the current spot rate
C) if the forward rate is greater than the current spot rate
D) if biased efficiency holds

Question

Quizplus · Accepted Answer

Market efficiency, in the context of foreign exchange, holds if the forward rate is an unbiased and efficient predictor of the future spot rate. This means that on average, the forward rate should equal the future spot rate, allowing no systematic profit from speculation on the direction of currency movements.

Market Efficiency Will Hold If