Which of the Following Is a Reason for Hedging a Portfolio

question 12

Multiple Choice

Which of the following is a reason for hedging a portfolio with an index futures?

• A) The investor believes the stocks in the portfolio will perform better than the market but is uncertain about the future performance of the market
• B) The investor believes the stocks in the portfolio will perform better than the market and the market is expected to do well
• C) The portfolio is not well diversified and so its return is uncertain
• D) All of the above

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Definitions:

Quick Ratio

A liquidity ratio that measures a company's ability to cover its short-term obligations with its most liquid assets, excluding inventory.

Current Ratio

A liquidity ratio that measures a company's ability to pay off its short-term liabilities with its short-term assets.

Current Ratio

A liquidity ratio that measures a company's ability to pay short-term obligations with its short-term assets.

Liquidity

The ability of an asset to be quickly converted into cash without significant loss in value.