Assume Zero Transaction Costs

question 52

Multiple Choice

Assume zero transaction costs. If the 180-day forward rate overestimates the spot rate 180 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.

---

Definitions:

Attraction

The action or power of evoking interest, pleasure, or liking for someone or something.

Young Adults

Individuals in the transitional phase of life between adolescence and full-fledged adulthood, typically aged 18 to 25.

Seasons of Life

A metaphorical way of describing the phases and significant periods of change in an individual's life.

Daniel Levinson

A psychologist known for his theory on adult development, particularly the concept of life stages and transitions that adults experience.