22-74 the Covariance of the Change in Spot Exchange Rates

question 109

Multiple Choice

22-74 The covariance of the change in spot exchange rates and the change in futures exchange rates is 0.6606,and the variance of the change in futures exchange rates is 0.6060.The variance of the change in spot exchange rates is 0.9090.What is the degree of hedging effectiveness?

• A)0.61.
• B)0.90.
• C)0.87.
• D)0.82.
• E)0.79.

---

Definitions:

Asymmetric Information

A situation where one party in a transaction has more or better information than the other, potentially leading to an imbalance in decision-making or outcomes.

Fee-For-Pay

A pricing model where services are provided and charged based on specific transactions or uses rather than a subscription or blanket fee.

Out-Of-Pocket Costs

Expenses for medical care that aren't reimbursed by insurance, including deductibles, co-payments, and coinsurance.

Outpatient Facilities

Medical centers or clinics where patients receive treatment without being admitted overnight, including diagnostic services and minor surgical procedures.