Assume a Corporation Is Receiving a Large Amount of Funds

question 32

Multiple Choice

Assume a corporation is receiving a large amount of funds in the near future. The company plans to use the funds to purchase municipal bonds. Also assume that the company is concerned that interest rates will decrease before the purchase date, which would make the municipal bonds more expensive. In order to hedge against this possibility, the company should ____ MBI futures contracts. If interest rates decrease, the futures contract will generate a ____.

• A)sell; loss
• B)purchase; gain
• C)purchase; loss
• D)sell; gain
• E)None of these are correct.

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Definitions:

Ethnicity

A category of people identified with each other based on common ancestral, social, cultural, or national experiences.

Social Construction

A theory in sociology and philosophy which posits that many aspects of society, including knowledge, are not inherent but are instead created by societal groups and interactions.

Genetic Influences

The effects that the genetic makeup of an individual has on their traits, behaviors, and susceptibilities to conditions.