Using Options to Control Interest-Rate Risk Reduces the Chance of a Loss

question 73

True/False

Using options to control interest-rate risk reduces the chance of a loss but increases the chance of a gain.

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Definitions:

Optimal Combination

An optimal combination refers to the selection of goods, services, or inputs that provides the highest satisfaction or return for a given cost or the lowest cost for a given level of satisfaction or output.

Inputs

Inputs are the resources used in the production process to produce goods or services, including labor, capital, materials, and energy.

Capital Intensive

A description of industries or businesses that require large investments in capital assets to produce goods or services.

Variable Cost

Costs that change in proportion to the level of production or activity within a company.