Hedge Funds Commonly Use Financial Leverage, Which Can

question 94

Multiple Choice

Hedge funds commonly use financial leverage, which can

• A)magnify their returns and magnify their losses.
• B)magnify their returns and limit their losses.
• C)reduce their risk and limit their losses.
• D)magnify their returns and not affect their risk.

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Definitions:

Strictly Applied

Refers to the rigorous enforcement or adherence to rules, laws, or principles without deviation or exception.

Consideration

Consideration refers to something of value that is exchanged between parties in a contract, making the agreement legally binding.

Gross Inadequacy

A significant disparity or insufficiency, often relating to an offer’s value in a contractual agreement, which may lead to questioning the fairness of the contract.

Consideration

Something of value exchanged between parties in a contract, which is necessary for the contract to be legally binding.