The Covariance of the Change in Spot Exchange Rates and the Change

question 123

Multiple Choice

The covariance of the change in spot exchange rates and the change in futures exchange rates is 0.6060,and the variance of the change in futures exchange rates is 0.5050.What is the estimated hedge ratio for this currency?

• A)0.306.
• B)0.694.
• C)1.440.
• D)1.200.

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Definitions:

Olfaction

The sense of smell, a chemical sense in which odorants are detected by olfactory receptors.

Retina

The light-sensitive layer of tissue at the back of the inner eye, which converts light into electrical signals sent to the brain via the optic nerve.

Light-Sensitive Film

A type of photographic film that reacts chemically to light exposure, capturing images based on the intensity and quality of light.

Pupil

The opening in the center of the iris of the eye through which light enters the eye.