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In a Forward Hedge, If the Forward Rate Is an Accurate

question 82

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In a forward hedge, if the forward rate is an accurate predictor of the future spot rate, the real cost of hedging payables will be:


Definitions:

Perfect Competition

A market structure characterized by a complete absence of rivalry among the producers, with many buyers and sellers, where all entities sell an identical product.

Perfect Knowledge

A hypothetical situation in economics where all consumers and producers have complete and instantaneous knowledge of all market prices, conditions, and trends.

Perfect Mobility

A theoretical condition where factors of production, such as labor and capital, can be freely moved from one use to another without costs or barriers.

Marginal Revenue

The revenue increment achieved by selling an extra unit of a product or service.

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