Assume That a Stock Mutual Fund Uses Stock Index Futures

question 16

Multiple Choice

Assume that a stock mutual fund uses stock index futures as it conducts dynamic asset allocation. This means that the mutual fund

• A) liquidates its stocks whenever it expects a market downturn.
• B) maintains a constant buy position in stock index futures.
• C) maintains a constant sell position in stock index futures.
• D) none of the above

---

Definitions:

Quadratic

Relates to an algebraic expression of the second degree, typically in the form of \(ax^2 + bx + c = 0\), where \(a\), \(b\), and \(c\) are constants.

Scatterplot

A graph that depicts the correlation between two quantitative variables by displaying data points on a Cartesian plane.

Linear Model

A mathematical representation that describes the relationship between one or more independent variables and a dependent variable.

Diameters

A straight line passing from side to side through the center of a body or figure, especially a circle or sphere, representing the longest distance across it.