Finish Chapter 9: Prob. # 1,3,4 (‘Questions and Applications’ – at end of each chapter)

1. Motives for Forecasting Explain corporate motives for forecasting exchange rates.

3. Fundamental Forecasting Explain the funda- mental technique for forecasting exchange rates. What are some limitations of using a fundamental technique to forecast exchange rates?

4. Market-Based Forecasting Explain the market- based technique for forecasting exchange rates. What is the rationale for using market-based forecasts? If the euro appreciates substantially against the dollar during a specific period, would market-based forecasts have overestimated or underestimated the realized values over this period? Explain.