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.

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Definitions:

Fixed Costs

Fixed expenses that are unaffected by changes in production or sales volume, encompassing rent, salaries, and insurance.

Absorption Costing

A method of accounting for all the costs associated with manufacturing a product, including all direct costs and fixed and variable overhead expenses.

Variable Costing

An accounting approach where only variable manufacturing costs are included in product costs, excluding fixed manufacturing overhead.

Fixed Costs

Costs that do not change with the level of production or sales, such as rent, salaries, and insurance premiums.