Which of the Following Indicates the Need to Place a Hedge

question 29

Multiple Choice

Which of the following indicates the need to place a hedge?

• A)The price movement in the underlying cash asset cannot be forecasted perfectly.
• B)The prices of the assets or liabilities are imperfectly correlated over time with the prices on the futures.
• C)Basis risk prevents the minimum risk of the portfolio from reaching zero.
• D)Treasury has been issuing more shorter-dated bonds to finance U.S.budget deficits.
• E)Spot bonds and futures on bonds are traded in different markets.

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Definitions:

H2 Visa

A type of visa allowing individuals to come to the United States temporarily for seasonal agricultural work.

Government Authority

An organization or body with the power to enforce laws, regulate behavior, and oversee activities within a specific area.

Subsidiary

A company that is completely or partly owned and wholly controlled by another company, known as the parent company.

Home-Country Nationals

Individuals who work for an organization or a subsidiary in their native country.