Which One of the Following Statements Regarding Hedging Is True

question 50

Multiple Choice

Which one of the following statements regarding hedging is true?

• A) Hedging is adding securities to an existing portfolio to increase the overall return.
• B) Hedging is a strategy used by investors to increase both the risk and return of a portfolio.
• C) Hedging is a strategy used by investors to reduce the risk of a portfolio.
• D) Hedging is a strategy used to increase portfolio volatility.
• E) None of these is true.

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Definitions:

Main Effects

The immediate impact that an independent variable has on a dependent variable within an experimental research setting.

Interaction Effects

Refers to the phenomenon where the effect of one variable on a particular outcome is different depending on the level of another variable.

Relationship

The method by which several concepts, items, or people interact, or the situation of being interconnected.

Main Effect

In the context of experimental design, it refers to the primary impact of an independent variable on a dependent variable, ignoring other variables.