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Which of the Following Statements About Hedging Is (Are)true

question 6

Multiple Choice

Which of the following statements about hedging is (are) true?
I.Hedging is a form of risk transfer.
II.Hedging is used to address the risk of unfavorable price fluctuations.


Definitions:

Required Rate

The minimum expected rate of return by investors for providing capital to a company, often used in valuing investments.

Constant Dividend

A fixed amount of money paid to shareholders of a corporation out of its earnings on a regular basis.

Required Return

The minimum expected return an investor seeks on an investment, factoring in the risk associated with it.

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