In Regards to Hedging, Which of the Below Statements Is

question 19

Multiple Choice

In regards to hedging, which of the below statements is FALSE?

• A) Hedging is the employment of a futures transaction as a temporary substitute for a transaction in the cash market.
• B) As long as cash and futures prices move together, any loss realized on one position (whether cash or futures) will be offset by a profit on the other position.
• C) The hedge position locks in a value for the cash position.
• D) When the profit and loss are equal, the hedge is called an equal hedge.

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Definitions:

Political Conditions

The current state of the government and political climate that can affect economic and business environments.

Economic Conditions

The state of the economy at a given time, including factors like inflation, unemployment rates, and economic growth.

Return On Total Assets

A financial metric that measures the profitability of a company relative to its total assets, indicating how efficiently a company uses its assets to generate profit.

Net Income

The amount of money that remains after all operating expenses, taxes, and costs have been subtracted from total revenues.