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Please explain the answer to the following question: Assume zero transaction costs. If the 90-day forward rate of the euro underestimates the spot rate 90
Please explain the answer to the following question:
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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