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Basic Question 1 of 27

What rates have been found to be good indicators of future spot exchange rates?

I. forward exchange rates.
II. spot exchange rates.
III. expected future spot exchange rates.

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Learning Outcome Statements

explain international parity relations (covered and uncovered interest rate parity, forward rate parity, purchasing power parity, and the international Fisher effect);

describe relations among the international parity conditions;

evaluate the use of the current spot rate, the forward rate, purchasing power parity, and uncovered interest parity to forecast future spot exchange rates;

explain approaches to assessing the long-run fair value of an exchange rate;

CFA® 2025 Level II Curriculum, Volume 1, Module 8.