In Order to Effectively Hedge a Stock Portfolio,the Portfolio Manager

question 17

Multiple Choice

In order to effectively hedge a stock portfolio,the portfolio manager must know the total dollar value of the portfolio,the current index futures price and

• A)The number of contracts available in the market
• B)The portfolio P/E ratio
• C)The relative volatility of the portfolio to the market
• D)More than one of the above

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Definitions:

Managers' Incentives

Incentives designed to motivate managers to act in the best interest of the stakeholders, often linked to performance metrics or company goals.

Budget Goal

A financial objective set during the budgeting process, aiming for specific income, expenditure, or savings targets over a period.

Straight Line Pay

Compensation structure where employees receive a fixed, regular payment or salary, typically without variation for actual hours worked or performance levels.

Managers' Incentives

Various forms of compensation and rewards designed to motivate managers to align their actions with the objectives of the owners or shareholders.