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Assume Zero Transaction Costs

question 8

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Assume zero transaction costs.  If the 180day forward rate is an accurate estimate of the spot rate 180 days from now,then the real cost of hedging receivables will be:


Definitions:

Null Hypothesis

The null hypothesis is a default statement that there is no effect or no difference, and it serves as the starting point for statistical hypothesis testing.

Production Process

The sequence of operations or procedures used to create a product or service.

Type I Error

A statistical mistake made when a true null hypothesis is incorrectly rejected.

Type II Error

A statistical mistake that occurs when a false null hypothesis is not rejected, erroneously indicating no effect or difference when one does exist.

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