Historical Analysis of Recent Changes in Exchange Rates in Both

question 94

Multiple Choice

Historical analysis of recent changes in exchange rates in both the spot and futures markets for a given currency reveals that spot rates are thirty percent more sensitive than futures prices.Given this information, the hedge ratio for this currency is

• A)0.70.
• B)0.77.
• C)1.30.
• D)1.43.
• E)1.86.

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Definitions:

Organization Expense

Organization expense refers to the costs associated with forming a business entity, such as legal fees, filing fees, and costs of issuing stock.

Paid in Capital in Excess

Financial capital received from investors above the par value of the shares issued, also known as additional paid-in capital.

Common Stock

Equity ownership in a corporation, giving holders voting rights and a share in the company’s profits through dividends.

Par Value

The face value of a bond or stock as stated by the issuing company, which does not necessarily match its market value.