Historical Analysis of Recent Changes in Exchange Rates in Both

question 93

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.

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Definitions:

M2

An expansive categorization of money that encompasses cash, checking deposits, and forms of near money that can be easily converted into cash or used for payments.

M1

M1 encompasses the most liquid forms of money supply, including cash and assets that can quickly be converted to cash.

M2

M2 is a broader classification of money supply that accounts for currency in circulation and various other types of accounts that are less liquid than those in M1.

M1

Refers to the physical money supply that includes coins and notes in circulation as well as non-bank public holdings of checkable deposits.