$5.$ Mixed Forecasting. Explain the mixed technique for forecasting exchange rates.

$6.$ Detecting a Forecast Bias. Explain how to assess performance in forecasting exchange rates. Explain how to detect a bias in forecasting exchange rates.

$7.$ Measuring Forecast Accuracy. You are hired as a consultant to assess a firm$$s ability to forecast. The firm has developed a point forecast for two different currencies presented in the following table. The firm asks you to determine which currency was forecasted with greater accuracy.

$10.$ Forecasting with a Forward Rate. Assume that the $4-$year annualized interest rate in the United States is $9$ percent and the $4-$year annualized interest rate in Singapore is $6$ percent. Assume interest rate par$-$ ity holds for a $4-$year horizon. Assume that the spot rate of the Singapore dollar is $$\mathrm{.}60.$ If the forward rate is used to forecast exchange rates, what will be the forecast for the Singapore dollar$$s spot rate in

$4$ years? What percentage appreciation or deprecia$-$ tion does this forecast imply over the $4-$year period?

$15.$ Forecasting the Euro. Cooper, Inc., a U$.$S$.-$based MNC$,$ periodically obtains euros to purchase Ger$-$ man products. It assesses U$.$S$.$ and German trade patterns and inflation rates to develop a fundamen$-$ tal forecast for the euro. How could Cooper possi$-$ bly improve its method of fundamental forecasting as applied to the euro?

$16.$ Forward Rate Forecast. Assume that you obtain a quote for a one$-$year forward rate on the Mexican peso. Assume that Mexico$$s one$-$year interest rate is $40$ percent, while the U$.$S$.$ one$-$year interest rate is $7$ percent. Over the next year, the peso depreciates by $12$ percent. Do you think the forward rate over$-$ estimated the spot rate one year ahead in this case? Explain.

$17.$ Forecasting Based on PPP versus the Forward Rate. You believe that the Singaporedollar$$sex$-$ change rate movements are mostly attributed to purchasing power parity. Today, the nominal annual interest rate in Singapore is $18$ percent. The nominal annual interest rate in the United States is $3$ per$-$ cent. You expect that annual inflation will be about $4$ percent in Singapore and $1$ percent in the United States. Assume that interest rate parity holds. To$-$ day the spot rate of the Singapore dollar is $$\mathrm{.}63.$ Do you think the one$-$year forward rate would under$-$ estimate, overestimate, or be an unbiased estimate of the future spot rate in one year? Explain. Mixed Forecasting. Explain the mixed technique for forecasting exchange rates.

Detecting a Forecast Bias. Explain how to assess performance in forecasting exchange

rates. Explain how to detect a bias in forecasting exchange rates.

Measuring Forecast Accuracy. You are hired as a consultant to assess a firm's ability to

forecast. The firm has developed a point forecast for two different currencies presented in the

following table. The firm asks you to determine which currency was forecasted with greater

accuracy.

Forecasting with a Forward Rate. Assume that the $4-$year annualized interest rate in the

United States is $9$ percent and the $4-$year annualized interest rate in Singapore is $6$ percent.

Assume interest rate par$-$ ity holds for a $4-$year horizon. Assume that the spot rate of the

Singapore dollar is $$\mathrm{.}60.$ If the forward rate is used to forecast exchange rates, what will be

the forecast for the Singapore dollar's spot rate in

$4$ years? What percentage appreciation or deprecia$-$ tion does this forecast imply over the

$4-$year period?

Forecasting the Euro. Cooper, Inc., a U$.$S$.-$based MNC$,$ periodically obtains euros to

purchase Ger$-$ man products. It assesses U$.$S$.$ and German trade patterns and inflation rates to

develop a fundamen$-$ tal forecast for the euro. How could Cooper possi$-$ bly improve its

method of fundamental forecasting as applied to the euro?

Forward Rate Forecast. Assume that you obtain a quote for a one$-$year forward rate on

the Mexican peso. Assume that Mexico's one$-$year interest rate is $40$ percent, while the U$.$S$.$

one$-$year interest rate is $7$ percent. Over the next year, the peso depreciates by $12$ percent. Do

you think the forward rate over$-$ estimated the spot rate one year ahead in this case? Explain.

Forecasting Based on PPP versus the Forward Rate. You believe that the

Singaporedollar'sex$-$ change rate movements are mostly attributed to purchasing power

parity. Today, the nominal annual interest rate in Singapore is $18$ percent. The nominal annual

interest rate in the United States is $3$ per$-$ cent. You expect that annual inflation will be about

$4$ percent in Singapore and $1$ percent in the United States. Assume that interest rate parity

holds. To$-$ day the spot rate of the Singapore dollar is $$\mathrm{.}63.$ Do you think the one$-$year

forward rate would under$-$ estimate, overestimate, or be an unbiased estimate of the future

spot rate in one year? Explain.