A Portfolio Manager Is Concerned That the Expected Drop in Interest

question 35

Multiple Choice

A portfolio manager is concerned that the expected drop in interest rates is going to lower the yield on the $1,000,000 of T-Bill she plans to buy in 3 months. She can hedge this potential interest rate risk by

• A) taking a short position in 3-month T-bill futures.
• B) taking a long position in 3-month T-bill futures.
• C) buying a call option on 3-month T-bill futures.
• D) buying a put option on 3-month T-bill futures.
• E) Either b or c would work.

Understand the concepts of productive and allocative efficiency in the context of monopoly and competitive markets.

Analyze the elasticity of demand in relation to pricing strategies and firm competition.

Understand the difference in pricing and output decisions between monopolistic and competitive firms.

Recognize economic inefficiencies associated with monopolies, including allocative and productive inefficiencies.

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Definitions:

Drinking Coffee

The consumption of coffee, a brewed drink prepared from roasted coffee beans, often associated with stimulating effects.

Sober Up

The process of becoming free from the effects of alcohol or drugs.

Marijuana Smoke

The inhalation and exhalation of smoke produced by burning marijuana, a psychoactive drug from the Cannabis plant.

Lung Cancer

A type of cancer that originates in the lungs, often associated with smoking, and characterized by uncontrolled cell growth in lung tissue.