Assume a Portfolio Manager Created a Short Interest Rate Hedge

question 55

Multiple Choice

Assume a portfolio manager created a short interest rate hedge for his/her portfolio. Given this hedge, the manager is

• A) essentially eliminating both the downside risk and the upside potential.
• B) partially diminishing the downside risk without impairing the upside potential.
• C) eliminating the downside risk and increasing the upside potential.
• D) eliminating the downside risk without hampering the upside potential.

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Definitions:

Basal Metabolic Rate

The number of calories required to keep your body functioning at rest, also known as the metabolism's resting rate.

Insulin Level

The concentration of insulin, a hormone produced by the pancreas that regulates blood sugar levels, in the bloodstream.

Pancreas

A gland in the digestive and endocrine system of vertebrates that produces enzymes for digestion and hormones such as insulin, which regulates blood sugar levels.

Insulin

A hormone produced by the pancreas that regulates glucose levels in the blood.