Consider the Following Two Statements: (I) Buying a Futures Contract

question 2

Multiple Choice

Consider the following two statements: (i) Buying a futures contract to reduce risk close to delivery is called a short hedge.
(ii) The hedging decision is independent of market efficiency.

• A)(i) is correct, (ii) is incorrect.
• B)(ii) is correct, (i) is incorrect.
• C)(i) and (ii) are both correct.
• D)(i) and (ii) are both incorrect.
• E)(i) and (ii) are both correct only if it is a forward contract.

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Definitions:

Conformity

The act of matching attitudes, beliefs, and behaviors to group norms, values, or expectations.

Collective Identities

Refers to the shared sense of belonging to a group, which shapes members' perceptions, actions, and interactions.

Asch Situation

A social psychology experiment by Solomon Asch that demonstrated the influence of group pressure on conforming.

Independence

The state or condition of being free from reliance on, or control by, others, often associated with self-sufficiency and autonomy.