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Assume Zero Transaction Costs

Question 28

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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