A Corporation Will Be Issuing Bonds in 6 Months and the Treasurer

question 56

Multiple Choice

A corporation will be issuing bonds in 6 months and the Treasurer is concerned about unfavorable interest rate moves in the interim.The best way for her to hedge the risk is to _________________.

• A) buy T-bond futures
• B) sell T-bond futures
• C) buy stock index futures
• D) sell stock index futures

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Definitions:

Oligopoly

A market structure dominated by a small number of large firms, leading to competitive and cooperative behavior among companies.

Pure Monopoly

A market structure where a single company or entity exclusively produces and sells a product or service, with no close substitutes.

Four-Firm Concentration Ratio

A metric indicating the total market share controlled by the four largest firms within an industry, used to assess market competitiveness.

Herfindahl Index

A measure of the concentration of market power held by the largest firms within an industry.