Which of the Following Statements Regarding a Short Hedge Is

question 1

Multiple Choice

Which of the following statements regarding a short hedge is true?

• A)A short hedge is when an FI takes a short position in a futures contract when rates re expected to rise;
• B)The FI loses net worth on its balance sheet if rates rise.
• C)A short hedge seeks to hedge the value of its net worth by selling an appropriate number of futures contracts.
• D)None of the above statements are true.
• E)All of the above statements are true.

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Definitions:

TRIN Ratio

The Trading Index Ratio, an indicator used in financial markets to gauge overall market sentiment or strength.

Moving Average

A statistical method used in finance to smooth out data points for a stock or other security by averaging the price points over a specific period of time, making it easier to identify trends.

Sell Signals

Indications, based on technical analysis or other factors, suggesting that it might be an opportune time to sell a particular investment.

Market Risk Premium

The difference between the expected return on a market portfolio and the risk-free rate.