If Managers Are Rational, They Will Only Hedge When They

question 73

Multiple Choice

If managers are rational, they will only hedge when they perceive that:

• A)Prices are headed in an adverse direction
• B)Derivative instruments are priced lower than actual value
• C)Risk reduction is preferable to higher potential profits
• D)They can increase their profitability by doing so

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Definitions:

Specific Offering

A distinct product or service presented to the market by a business.

Market

A place or arena where buyers and sellers meet to exchange goods and services, often described in terms of the number of buyers and sellers, the nature of the goods and services, and the process of exchange.

Canned Food

Food items that have been preserved by sealing in airtight containers and then heat sterilized for long-term storage.

Single-Serving Sizes

Packaged products designed to be consumed in one sitting, offering convenience and portion control.