Which of the Following Indicates the Need to Place a Hedge

question 45

Multiple Choice

Which of the following indicates the need to place a hedge?

• A)The price movement in the underlying cash asset cannot be forecasted perfectly.
• B)The prices of the assets or liabilities are imperfectly correlated over time with the prices on the futures.
• C)Basis risk prevents the minimum risk of the portfolio from reaching zero.
• D)Treasury has been issuing more shorter-dated bonds to finance U.S.budget deficits.

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Definitions:

Exports

Goods or services sent from one country to another for sale or exchange.

Imports

Goods and services that are brought into one country from another for sale.

Net Exports

The difference between a country's total exports of goods and services and its total imports, reflecting the trade balance.

U.S. Consumption

This term refers to the total value of all goods and services consumed within the United States over a specific time period.