Fin. 558: Quiz 4B

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Suppose the USD/XYZ exchange rate follows a random walk. The last three quarters of exchanges rates are: Quarter USD/XYZ 2013Q2 0.332 2013Q3 0.4 2013Q4 0.416 Use the concept of a random walk to forecast the 2014Q1 exchange rate given the above information.

.416

Suppose the following forecasts and realized exchange rates exist: Quarter Forecast Realized Spot Rate 2013Q2 USD10.120/ABC USD10.87/ABC 2013Q3 USD11.124/ABC USD11.995/ABC 2013Q4 USD12.126/ABC USD12.229/ABC Calculate the mean absolute error.

.5747

Suppose the following forecasts and realized exchange rates exist: Quarter Forecast Realized Spot Rate 2013Q2 USD10.120/ABC USD10.711/ABC 2013Q3 USD11.124/ABC USD11.95/ABC 2013Q4 USD12.126/ABC USD12.327/ABC Calculate the root mean squared error.

.5978

Which of the following forecasting techniques is usually used for short-term forecasts using only past exchange rate data, and some other data such as the volume of currency trade, to predict future exchange rates? fundamental analysis market-based forecasts fundamental analysis Technical analysis

Technical analysis

A higher nominal interest rate in one country indicates the fact that the country's currency was expected to ________. depreciate stay the same appreciate

depreciate

The Fisher Effect decomposes nominal interest rates into the ________ and the expected rate of inflation. expected real exchange rate expected real interest rate nominal exchange rate expected forward rate of return

expected real interest rate

Which of the following forecasting techniques is typically based on formal economic models of exchange determination, which link exchange rates to money supply, inflation rates, productivity growth rates, and the current account? market-based forecasts statistical analysis technical analysis fundamental analysis

fundamental analysis


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