During the early 1990s, Risk magazine published exchange rate forecasts provided by 10 of the world's major
Question:
a. Rank the three forecasts, including the forward rate, based on the forecast error.
b. Which forecast(s) correctly predicted the depreciation of Japanese yen relative to the dollar?
c. David Brock and Brian Lee are speculators who buy and sell currencies forward. David Brock took a position based on Commerzbank's forecast for the yen to dollar exchange rate while Brian Lee took a position based on Harris Bank's forecast. Who turned out to be better off?
d. Discuss whether there is any conflict in your answers to parts (a) and (c).
Exchange Rate
The value of one currency for the purpose of conversion to another. Exchange Rate means on any day, for purposes of determining the Dollar Equivalent of any currency other than Dollars, the rate at which such currency may be exchanged into Dollars...
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