Why Do Investors Hedge Using Futures Contracts

question 93

Multiple Choice

Why do investors hedge using futures contracts?

• A) they are seeking to increase liquidity
• B) they are willing to pay for a reduction in risk
• C) in order to provide a counterparty to speculators
• D) they are more flexible than forward contracts

---

Definitions:

Productivity Growth

An increase in the efficiency of production, often measured by the output of goods and services per unit of input over time.

Savings Rate

The percentage of money that individuals or households save from their disposable income.

Industrially Advanced Nations

Countries that have highly developed industries, technological infrastructure, and a high standard of living.

LDCs

Less Developed Countries; nations with low levels of economic development, often measured by gross domestic product (GDP) per capita, industrialization, and living standards.