Larry Foster Has Bought a Car with Front and Side

question 75

Multiple Choice

Larry Foster has bought a car with front and side airbags and antilock brakes. How is Larry managing his risk?

• A) Avoidance
• B) Reduction
• C) Assumption
• D) Shifting
• E) Development

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Definitions:

Aluminum Futures

Contracts to buy/sell aluminum at a future date at a price agreed upon today, used for hedging or speculation on the aluminum market.

Short

Refers to short selling, a strategy used by investors who anticipate a stock's price will decline, allowing them to buy back at a lower price.

CME Weather Futures

Financial derivatives traded on the Chicago Mercantile Exchange that allow for hedging or speculation on weather-related risks.

Cash-Settled Contract

A financial agreement where the difference in the value of a contract is exchanged in cash rather than through physical delivery of goods or assets.