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One Possible Reason for a Balance Sheet Hedge Could Be

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One possible reason for a balance sheet hedge could be because the firm has debt covenants or bank agreements that state the firm's debt/equity ratios will be maintained within specific limits.


Definitions:

T-test

A statistical test used to compare the means of two groups to determine if they are significantly different from each other.

Population Variances

The squared difference between each data point in the entire population and the mean of the population, indicating overall data spread.

Test Statistic

A calculated value from sample data used to decide whether to reject the null hypothesis in hypothesis testing.

Degrees of Freedom

The quantity of distinct values or numbers that can be allocated to a statistical distribution.

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