Assume Zero Transaction Costs

question 30

Multiple Choice

Assume zero transaction costs. If the 90-day forward rate of the euro is an accurate estimate of 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:

Superiority Complex

A psychological defense mechanism in which an individual exaggerates their own abilities and worth in order to overcome feelings of inferiority.

Idealized Self

A version of oneself that represents the standards of perfection, success, and attractiveness set by oneself or by societal expectations, often unattainable and leading to dissatisfaction.

Bowlby and Ainsworth

Refers to John Bowlby and Mary Ainsworth, psychologists known for their work in developing attachment theory.

Birth Order

The theory that the order in which a child is born into a family can influence their personality and psychological development.