A Forward Contract Hedge Is Very Similar to a Futures

question 69

Multiple Choice

A forward contract hedge is very similar to a futures contract hedge, except that ____ contracts are commonly used for ____ transactions.

• A)forward; small
• B)futures; large
• C)forward; large
• D)none of the above

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Definitions:

Limited Number

A restricted quantity, usually referring to a specific allocation or issuance of items, resources, or opportunities.

Standard Deviation

A measure of the dispersion or variability of a set of data points from their mean, used in statistics to quantify the amount of variation or dispersion of a dataset.

Total Risk

The complete spectrum of all types of risk that an investment or project might face, including both systematic and unsystematic risks.

Market Risk Premium

The extra return over the risk-free rate that investors demand for choosing to invest in the stock market over a risk-free asset.