Even if the use of a forward contract for hedging prevents a loss (or gain) from exchange rate changes on the hedged item, which of the following may result in a cost to an entity that uses forward contracts for hedging purposes?
I. Fees imposed by the counterparty to the forward contract.
II. A difference between the spot rate and the forward rate when the forward exchange contract is executed.
a) I only.
b) II only.
c) Both I and II.
d) Neither I nor II.
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