The Purpose of Hedging with Stock Index Futures Is Not

question 51

True/False

The purpose of hedging with stock index futures is not to magnify the gains and losses on the hedged stock portfolio.

---

Definitions:

Face Amount

The face amount is the nominal or dollar value printed on a financial instrument like a bond or insurance policy, representing the amount due at maturity or the coverage amount.

Bond Redemption

A financial term referring to the process of repaying the principal amount of a bond at its maturity date.

Market Value

Market value refers to the price at which an asset would trade in a competitive auction setting.

Present Value

The current value of a future sum of money or stream of cash flows given a specified rate of return.