What is the statistical interpretation of the expected future spot rat

What is the statistical interpretation of the expected future spot rate?

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ANSWER

Answer: The expected future spot rate is the conditional mean of the probability distribution of future spot rates. The probability distribution describes all of the possible realizations (or ranges of realizations) of the future spot rate and assigns probabilities to those values (or ranges of values). The conditional mean of the probability distribution of future spot rates takes a probability weighted average of those possible realizations (or ranges of realizations). We say that the expectation is conditional because we use all available information at the time when we are describing the probability distribution.