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A Significant Limitation to Financial Futures as an Interest-Rate Hedging

question 137

Multiple Choice

A significant limitation to financial futures as an interest-rate hedging device is a special form of risk known as ___________ risk.Which of the following terms correctly completes the statement?


Definitions:

Carrying Value

The book value of assets and liabilities on a company's balance sheet, reflecting the historical cost of assets minus accumulated depreciation.

Convertible Bonds

Bonds that can be converted into a predetermined number of the issuing company's shares at certain times during its life, usually at the discretion of the bondholder.

Carrying Value

The book value of an asset or liability on a company's balance sheet, calculated as the original cost minus accumulated depreciation or amortization.

Common Stock

Represents a type of security that signifies ownership in a corporation and represents a claim on part of the corporation's assets and earnings.

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