22-72 Historical analysis of recent changes in exchange rates in both the spot and futures markets for a given currency reveals that spot rates are thirty percent more sensitive than futures prices.Given this information,the hedge ratio for this currency is
A)0.70.
B)0.77.
C)1.30.
D)1.43.
E)1.86.

Question

Quizplus · Accepted Answer

The hedge ratio is the ratio of the change in the spot rate to the change in the futures price. In this case, the spot rate is 30% more sensitive than the futures price, so the hedge ratio is 1.30.

22-72 Historical Analysis of Recent Changes in Exchange Rates in Both