Global Finance

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MULTIPLE CHOICE QUESTIONS:

1. Forecasts
a) become more accurate with longer time horizons
b) are rarely perfect
c) are more accurate for individual items than for groups of items
d) all of the above.

2. A fundamental analysis in exchange rate forecasting involves the following except .
a) inflation ratesb) interest ratesc) money supplyd) price trends

3. Which statement is not true about forecasting method?
a) There is no single best method of forecasting.
b) Technical analysis is preferred to currency traders.
c) Fundamental analysis is preferred by economists.
d) Mixed forecasting will be the best since it has mixed all forecasting methods.

4. A technical analysis in exchange rate forecasting involves the following except . a) past priceb) political factorsc) price chartingd) volume movements

5. Which one is not one of the three kinds of efficient markets? a) weak form efficient marketb) semi-strong form efficient market c) strong form efficient marketd) perfectly efficient form market

6. If the forward rate is the best available predictor (unbiased) of future spot rates, the forward market is . a) inefficientb) efficientc) semi-efficientd) none of the above

7. Whether a country will devalue its currency under a fixed rate system is ultimately a __ decision. a) economic b) monetaryc) political d) fiscal

8. The spot rate is US$0.50 per Australian dollar. The annual interest rates are 12 percent for the United States and 8 percent for Australia. If these interest rates remain constant, then what is the US dollar market forecast of the spot rate for the Australian dollar in five years? a) $.4669b) $.5899c) $.5997 d) $.5447

9. A forecast based on the previous forecast plus a percentage of the forecast error (previous) is a(an)A forecast based on the previous forecast plus a percentage of the forevious) a) qualitative forecastb) naive forecast

c) moving average forecastd) exponentially smoothed forecast

10. The percent of variation in the dependent variable that is explained by the regression equation (independent variable) is measured by the a) mean absolute deviationb) slope
c) coefficient of determinationd) correlation coefficient

11. An exchange rate is said to ------when it’s short term response to a change in market fundamentals is greater than its long run response. a) overshootb) undershootc) depreciated) appreciate

12. Which of the following forecasting techniques would best represent the use of today's forward exchange rate to forecast the future exchange rate? |a) |fundamental forecasting. |c) |technical forecasting. | |b) |market-based forecasting. |d) |mixed forecasting. |

13. If a particular currency is consistently declining substantially over time, then a market-based forecast will usually have: |a) |underestimated the future exchange rates over time. | |b) |overestimated the future exchange rates over time. | |c) |forecasted future exchange rates accurately. | |d) |forecasted future exchange rates inaccurately but without any bias toward consistent underestimating or overestimating. |

14. Which of the following is true according to the text?
|a) |Forecasts in recent years have been very accurate. | |b) |Use of the absolute forecast error as a percent of the realized value is a good measure to use in detecting a forecast bias. | |c) |Forecasting errors are smaller when focused on longer term periods....
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