A Futures Instrument,such as a T-Bill,can Be Used to Hedge

question 2

Multiple Choice

A futures instrument,such as a T-bill,can be used to hedge a cash or a spot instrument such as the prime rate,where the two instruments are not perfectly correlated.What type of hedge is this referred to as?

• A)A perfect hedge
• B)A straight hedge
• C)A cross hedge
• D)None of the above

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Definitions:

Maximize Utility

The economic theory or objective of achieving the highest level of satisfaction possible with available resources.

Borda Count

A voting method in which voters rank candidates or options, and points are assigned based on the position in which each option is ranked, used to determine a consensus winner.

Independence of Irrelevant Alternatives

A principle in decision theory stating that the preference between two options should not change because of the introduction of new alternatives.

Median Voter

A theoretical concept that suggests the outcome of a majority vote is most likely to represent the preferences of the voter who is in the middle of the political spectrum.