Yes, you need to have a FQDN set in your hosts file and DNS but you don't need a 'real' domain name unless your mail server is reachable from the internet.
Why? That's because real mail servers are reachable from the internet and need a FQDN, the same rule will also ap[ply to 'home' users and people with domain names that aren't visible to the internet.
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Regards
Bill
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