In Nearly All Cases, the Purpose of a Hedge Is

question 28

Multiple Choice

In nearly all cases, the purpose of a hedge is to

• A) reduce or eliminate risk.
• B) make a very high profit in an extremely short time frame.
• C) speculate on a downward drop in a general market index.
• D) speculate on an upward movement in a given currency.

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Definitions:

Rising Incomes

An economic condition characterized by a general increase in the level of wages, salaries, and profits across a population or economy.

Population Growth

The increase in the number of individuals in a population, often measured as a percentage of growth over a specific period of time.

Capital Flight

The transfer of savings from developing countries to industrially advanced countries to avoid government expropriation, taxation, or higher rates of inflation, or simply to realize greater returns on financial investments.

Export Earnings

The revenue a country or business receives from selling goods and services to other countries.