Assume Zero Transaction Costs

question 28

Multiple Choice

Assume zero transaction costs. If the 90-day forward rate of the euro underestimates the spot rate 90 days from now, then the real cost of hedging payables will be:​

• A) ​positive.
• B) ​negative.
• C) ​positive if the forward rate exhibits a premium, and negative if the forward rate exhibits a discount.
• D) ​zero.

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Definitions:

Twins

Two individuals born from the same pregnancy, who can be either identical (from one egg) or fraternal (from two different eggs).

Adopted Children

Children who have been legally taken and raised by parents who are not their biological parents.

Heritability

The proportion of variation in traits among individuals that can be attributed to genetic factors.

Environment

The environment refers to the natural and artificial settings in which a person, animal, or plant exists and functions.