Question: When performing a linear regression of the relationship between changes in spot prices and changes in futures prices, what does R 2 = 0 indicate?

When performing a linear regression of the relationship between changes in spot prices and changes in futures prices, 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.

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