Assume Zero Transaction Costs

question 34

Multiple Choice

Assume zero transaction costs. If the 90-day forward rate of the euro underestimates the spot rate 90 days from now, then the real cost of hedging payables will be:

• A) positive.
• B) negative.
• C) positive if the forward rate exhibits a premium, and negative if the forward rate exhibits a discount.
• D) zero.

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Definitions:

Aqueous Extraction

A process of separating compounds based on their solubility in water, often used in the isolation and purification of substances from mixtures.

Mass Spectrum

A plot or representation showing the distribution of ionized species according to their mass-to-charge ratio, used to determine the molecular weight and structure of compounds.

McLafferty Rearrangement

A fragmentation reaction observed in mass spectrometry analysis, involving the transfer of a hydrogen atom via a six-membered transition state leading to the cleavage of a molecule.

Carboxylic Acids

Organic compounds characterized by a carboxyl group (-COOH), known for their acidic properties.