A Futures Position That Is Equal, but Opposite, the Position

question 57

Multiple Choice

A futures position that is equal, but opposite, the position you have in the underlying asset defines which one of the following terms?

• A)short hedge
• B)long hedge
• C)full hedge
• D)partial hedge
• E)underlying hedge

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Definitions:

Yield To Maturity

The total return expected on a bond if held until it matures, considering all interest payments made over the life of the bond and its redemption value.

4-Year Bond

A debt security that matures in four years from the issuance date.

Forward Rate

An interest rate agreed today for a loan to be made or a bond to be purchased at a future date.

Zero-Coupon Bond

A type of bond that does not pay interest during its life but is sold at a discount from its face value and pays its full face value at maturity.