When the Portfolio Manager Wants to Hedge a Stock Portfolio

question 33

True/False

When the portfolio manager wants to hedge a stock portfolio using an index futures contract,he or she must know: 1)the total dollar value of the portfolio,2)the current index futures price 3)the relative volatility of the portfolio to the market.

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Definitions:

Common Stock

Common stock represents ownership shares in a corporation, entitling holders to vote on company matters and potentially receive dividends.

Retained Earnings

Retained earnings represent the portion of net earnings not paid out as dividends but retained by the company to be reinvested in its core business or to pay debt.

Income Statement

A financial statement that shows a company's revenues, expenses, and profits or losses over a particular period.

Rent Expense

The cost incurred for leasing a property or equipment used in the operation of a business.