If the exchange rate follows a random walk A)the future exchange rate is unpredictable. B)the future exchange rate is expected to be the same as the current exchange rate,S_t = E(S_t+ 1). C)the best predictor of future exchange rates is the forward rate F_t = E(S_t+ 1/I_t). D)the future exchange rate is expected to be the same as the current exchange rate,S_t = E(S_t+ 1),and the best predictor of future exchange rates is the forward rate F_t = E(S_t+ 1/I_t).

Question

Quizplus · Accepted Answer

The Answer of If the exchange rate follows a random walk A)the future exchange rate is unpredictable. B)the future exchange rate is expected to be the same as the current exchange rate,S_t = E(S_t+ 1). C)the best predictor of future exchange rates is the forward rate F_t = E(S_t+ 1/I_t). D)the future exchange rate is expected to be the same as the current exchange rate,S_t = E(S_t+ 1),and the best predictor of future exchange rates is the forward rate F_t = E(S_t+ 1/I_t).

If the Exchange Rate Follows a Random Walk