If Managers Are Rational, They Will Only Hedge When They

question 85

Multiple Choice

If managers are rational, they will only hedge when they perceive that:

• A)prices are headed in an adverse direction.
• B)derivative instruments are priced lower than actual value.
• C)risk reduction is preferable to higher potential profits.
• D)they can increase their profitability by doing so.

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Definitions:

Differentiate Labour

The process of distinguishing or creating differences between types of labor based on skills, tasks, or responsibilities.

Divide Labour

The allocation of different parts of a work process or task to different individuals in order to improve efficiency and productivity.

Intellectual Limitations

Restrictions in an individual's cognitive functioning and abilities, which may affect learning, problem-solving, and daily adaptive behaviors.

Physical Limitations

Constraints related to the physical capabilities of individuals, potentially affecting their work or daily activities.