Which of the Following Is a Reason for Hedging a Portfolio

question 12

Multiple Choice

Which of the following is a reason for hedging a portfolio with an index futures?

• A) The investor believes the stocks in the portfolio will perform better than the market but is uncertain about the future performance of the market
• B) The investor believes the stocks in the portfolio will perform better than the market and the market is expected to do well
• C) The portfolio is not well diversified and so its return is uncertain
• D) All of the above

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Definitions:

Dark-Colored

Describes substances or materials that reflect very little light, making them appear black or close to black in color.

Stretched Pebbles

Elongated pebbles that have been deformed and stretched by tectonic forces in a metamorphic environment.

Anticline

An anticline is a type of fold that is arch-shaped and has its oldest beds at its core, typically resulting from compressional forces in the Earth's crust.

Syncline

A geological structure where rock layers fold downward, creating a U-shaped valley.