You Own a Diversified Investment Portfolio and Wish to Hedge

question 21

Multiple Choice

You own a diversified investment portfolio and wish to hedge it against market declines. Which one of the following would be best suited as a cross-hedge for this purpose?

• A)going long on Treasury bonds in the spot market
• B)going long on DJIA futures
• C)going short on S&P 500 index futures
• D)going long on an index fund
• E)going short on Eurodollar futures

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Definitions:

Pollution

Pollution is the introduction of harmful substances or products into the environment, negatively impacting the planet's ecosystems and human health.

Market System

An economic system where decisions about production, investment, and distribution are based on supply and demand, and prices of goods and services are determined in a free price system.

Command-and-control

A type of regulation where the government sets specific limits for pollution emissions and may also mandate specific pollution control technologies.

Incentive-based Regulations

Regulatory methods designed to encourage businesses to improve their environmental performance through rewards or penalties.