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Question
What does R2 = 0 indicate?
A. Changes in the spot rate and changes in the futures price are perfectly correlated.
B. All observations between changes in spot rate and changes in futures price lie on a straight line.
C. The spot and future exchange rates are expected to move imperfectly together.
D. The FI must sell a greater number of futures to hedge the cash position.
E. There is no statistical association between changes in spot rates and changes in futures price.
Answer
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