Which of the Following Statements About Hedging a Stock Portfolio

question 25

Multiple Choice

Which of the following statements about hedging a stock portfolio with stock index futures is NOT true?

• A)Futures contracts magnify gains (or losses) on the stock portfolio
• B)In a declining market, futures contracts help offset losses on the portfolio
• C)A risk-taker would probably not hedge the entire portfolio with stock index futures
• D)All of the above are true

Identify the role and impact of regulatory bodies and legislation on professional conduct and liability.

Understand the legal liabilities and responsibilities of accountants under the Securities Exchange Act of 1934 and the Securities Act of 1933.

Identify the conditions under which accountants can be held liable for fraud and misrepresentation in financial reporting.

Describe the legal consequences of preparing or assisting in the preparation of false tax returns as stipulated by the Internal Revenue Code.

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Definitions:

Thrifty

Being careful with money and resources by avoiding waste, spending wisely, and seeking good value.

Miserly

A person who is extremely reluctant to spend money; excessively frugal or stingy.

Individuals

Persons considered separately from other members or units in a group or category.

Look Alike

Generally refers to two or more entities that are visually similar to each other; often used in the context of people, products, or phenomena that share appearances.