If Managers Are Rational, They Will Hedge Only When They

question 32

Multiple Choice

If managers are rational, they will hedge only 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:

Organizational Culture

The shared beliefs, values, norms, and practices that shape the behavior and interaction of members within an organization.

New Organization

Refers to a freshly established entity or the process of restructuring an existing one to operate in a novel manner.

Typically Emerges

Refers to how something commonly or usually comes into being or becomes apparent over time.

Cultural Change

The transformation of the collective behaviors, values, practices, and norms of an organization or society over time.