If a Financial Institution Uses Stock Index Futures to Completely

question 87

Multiple Choice

If a financial institution uses stock index futures to completely hedge the systematic component of its stock portfolio,the resulting portfolio will have a beta close to ________.

• A) 0.00
• B) 1.00
• C) 2.00
• D) 0.50.

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Definitions:

Encoding

The procedure of changing data into a format that allows for its storage in memory.

Information Processing

A theory describing how the human mind takes in, stores, retrieves, and uses information, likening the mind to a computer.

Sensory Storage

The initial process of storing information, taken in through the senses, for a very brief period.

Memory Capacity

The amount of information that can be held in the memory system at one time, varying across short-term and long-term memory stores.