The following table contains Japanese yen to dollar exchange rate data that were published in issues of Risk magazine. Each period is three months. Spot rate is the actual spot exchange rate prevailing at the start of a period. Fonoard rate is the three-month forward exchange rate prevailing at the start of a period. Forecast rate is the forecast made by the Industrial Bank of Japan at the start of a period for the spot exchange rate at the start of the next period (that is, the forecast for three months later). To illustrate, at the beginning of the third period, the actual spot exchange rate was 152.750, the three-month ahead forward rate was 153.600, and the rate forecast by the Industrial Bank for the start of the fourth period was 151. The actual spot exchange rate that was realized at the start of the fourth period was 149.400. Based on the root mean squared error, was the Industrial Bank of Japan able to outperform the forward rate? (Do the calculations for the percentage forecast error.) You are also given that the spot rate realized three months after the last forecast given in the table was 139.25.

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Forecast Rate 140 Forward Rate t Rate 143.164 144.300 152.750 149.400 129.600 129.500 Period Spo 142.511 143.968 153.600 149.400 129.700 129.800 151 143 130 131 4 6