If a Financial Institution Expects That the Market Value of Its

question 7

Multiple Choice

If a financial institution expects that the market value of its municipal bonds will decline because of economic conditions, it could hedge its position by ____ futures contracts on ____.

• A)purchasing; Treasury bonds
• B)purchasing; the S&P 500 Index
• C)purchasing; the Municipal Bond Index
• D)selling; the Municipal Bond Index

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Definitions:

Preemption

The doctrine that allows a higher level of government to override or prevent actions of a lower level of government in certain areas.

French and Indian War

A conflict between 1754 and 1763 in North America, part of a global struggle between France and Britain, which ultimately led to British dominance in the continent.

Colonial Defense

Strategies and actions taken by a colony to protect itself from military threats and secure its interests during the colonial period.

British Government

The central government of the United Kingdom of Great Britain and Northern Ireland, which operates under a parliamentary system.