When There Is a Mismatch Between a Firm's Risk Exposure

question 8

True/False

When there is a mismatch between a firm's risk exposure and the underlying futures contract used for hedging,it referred to as basis risk.

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Definitions:

Inventory

The total amount of goods and materials held by a company that are ready for sale or in the process of being produced.

Common Stock

A type of equity security that represents ownership in a corporation, giving holders voting rights and a share of the profits.

Cash Dividends

Cash distributions from a company's earnings to its shareholders as a reward.

Land

A tangible asset representing property owned by an individual or business.