The Price Sensitivity Rule

question 23

Multiple Choice

The price sensitivity rule

• A) determines the number of futures contracts to trade.
• B) states that a hedging futures position must have the same sensitivity to interest rate changes as the asset or portfolio whose value is being hedged.
• C) requires determining the relative price variability of a futures contract and underlying assets given a change in interest rates.
• D) all of the above.

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Definitions:

Market Rate

The prevailing price or interest rate for goods, services, or securities in a competitive marketplace.

Total Fertility Rate

The average number of children that would be born to a woman over her lifetime, given current age-specific fertility rates.

Population

The total number of people inhabiting a specific area or region.

Generation

A group of individuals born and living around the same time, sharing similar cultural experiences or characteristics.