Question

If the foreign exchange marketi already reflected in today's exchange rates A) semistrong and weakform efficient C) semistrong-form efficient then all relevant public information to B) strong form officient D) weak-foam effident 12) Which of the following is not one of the major reasons for MNCS to forecast exchange rates? A) to determine whether to require the subsidiary to remit the funds or invest them focally B) to decide in which foreign market to invest the excess cash C) to decide where to borrow at the lowest cost D) to speculate on the exchange rate movements 12) 13) -------- In which their home currency's value is same to a foreign currency or to soment of account. A) freely floating B) Fixed C) managed float D) ped 14) To force the dollar to depreciate, the central bank can ----------- by exchanging dollars that it holds as reserves for other foreign currencies in the foreign exchange market. A) sterilized intervention B) nonsterilized intervention C) direct intervention D) indirect intervention 15) Sensitivity analysis allows for all of the following except: A) consideration of alternative scenarios B) focus on a single point estimate of future exchange rates. C) development of a range of possible future values D) accountability for uncertainty 16) A depreciation of the dollar causes A) an increase in U.S. imports. C) an increase in the prices of U.S. imports. B) an increase in the prices of U.S. exports. D) a decrease in US. exports 17) Purchasing power parity is used in: A) fundamental forecasting C) Accounting-based forecasting B) market-based accounting D) technical forecasting 18) ------------ Involves the use of historical exchange rate data to predict future value A) Market-based forecasting B) Technical forecasting C) Fundamental forecasting D) Mixed forecasting 19) ---------- Corporations that issue bonds to secure long-term funds may consider denominating the bonds in foreign currencies. A) short-term investment decision B) earnings assessment C) capital budgeting decision D) long-term financing decision 20) A rise in the real exchange rate is called A) a real devaluation. C) a real appreciation. B) a real bargain D) a real depreciation

Answer 1

Note: As per answering guidelines, only the first question can be answered.

Solution- 11

The differences between weak form efficient markets, semistrong, strong form and weak semi-strong efficient markets is the ability of markets to efficiently discount all relevant information that impacts prices.

These are the versions of efficient market hypothesis which analyses market's ability to correctly discount relevant information. Weak form efficiency believes that past Market data is fully reflected in current prices but there could be some fundamental information that the market doesn't discount efficiently in prices. Semistrong efficiency believes that while all public information is correctly discounted in prices but private information is still not correctly adjusted in prices.

The strong form efficiency, which is the most stringent form of efficient market hypothesis believes that market discounts all relevant information, whether past or present, private and public in the prices.

As per the given question, the statement speaks about only the public information getting reflected in exchange rates which is a reflection of semi-strong efficient markets, i.e. if the forex markets are semi-strong efficient, then all relevant information is already reflected into stock prices.

Therefore, the correct option is C.