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:

Opportunity Cost

The value of the next best alternative forgone as a result of making a decision.

Private Ownership

The holding of property by non-governmental legal entities or individuals.

Conservation Of Resources

Involves managing natural resources wisely to prevent depletion and ensure sustainability for future generations.

Accountable

Being responsible or answerable for actions or decisions, often in a professional or personal context.