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You must determine whether there is a forecast bias in the forward rate. You apply regression analysis to test the relationship between the actual spot rate and the forward rate forecast (F): S = a0 +...

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You must determine whether there is a forecast bias in the forward rate. You apply regression analysis to test the relationship between the actual spot rate and the forward rate forecast (F):
S = a0 + a1 (F)
The regression results are as follows:
Coefficient Standard Error
a0 = .006 ……………….. .011
a1 = .800 ………………… .05
Based on these results, is there a bias in the forecast? Verify your conclusion. If there is a bias, explain whether it is an overestimate or an underestimate.

Answered Same Day Dec 24, 2021

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Robert answered on Dec 24 2021
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