27. Given the below data for the US dollar and Canadian dollar exchange rates, which of the following statements is true? E[CAD|USD Rate] and E[USD|CAD Rate] denote the mean of the CAD|USD Rate and USD|CAD Rate, respectively.

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A. E[CAD|USD Rate] = 1/E[USD|CAD Rate]

B. E[USD|CAD Rate] >= 1/E[CAD|USD Rate]

C. E[USD|CAD Rate] <= 1/E[CAD|USD Rate]

D. E[CAD|USD Rate] = E[USD|CAD Rate]

Correct answer is Bfficeffice" />

A is incorrect as 1 does not equal 1/1.0101010.

B is correct, as 1.0101010 is greater than or equal to 1/1. This is due to Jensen's Inequality, which says that for any convex function the expectation of f(x) is greater than or equal to the function evaluated at the expectation of x. 

C is incorrect as 1.0101010 is not less than or equal to 1.

D is incorrect as 1 is not equal to 1.0101010.

Reference: Related to the concept of Jensen's Inequality is that of the Siegel Paradox, which is mentioned in ffice:smarttags" />Hull, chapter 21, on or about the last few pages depending on the edition.