The true cost of hedging foreign currency risk is the difference between the forward rate and the expected spot rate.

Question

Quizplus · Accepted Answer

The true cost of hedging foreign currency risk indeed involves the difference between the forward rate and the expected spot rate at the time of the contract's maturity. This difference reflects the market's expectations of future currency movements and the premium or discount for entering into a forward contract.

The True Cost of Hedging Foreign Currency Risk Is the Difference