If a Futures Contract Is More Volatile Than the Portfolio

question 75

Multiple Choice

If a futures contract is more volatile than the portfolio value, the amount of principal represented by the futures contracts to hedge the portfolio is ____ the market value of the securities to be hedged.

• A)smaller than
• B)greater than
• C)equal to
• D)B and C are both possible

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Definitions:

Short-term Notes Payable

Debt obligations that are due to be paid within a year, often used for working capital purposes or to finance short-term liabilities.

Interest Charges

Costs incurred for borrowing money, calculated as a percentage of the principal amount loaned.

Account Payable

An obligation of a company to pay a short-term debt to its creditors or suppliers.

Deductions

Amounts subtracted from gross income or revenue to calculate net income or taxable income, including expenses, allowances, and discounts.