One of the Drawbacks of Using Futures Contracts to Hedge

question 25

Multiple Choice

One of the drawbacks of using futures contracts to hedge is that managers in a firm may use the futures contracts to ________ and consequently increase the firm's risk rather than reducing it.

• A)hedge
• B)produce
• C)speculate
• D)increase managerial compensation
• E)expand

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Definitions:

Central Nervous System

The part of the nervous system consisting of the brain and spinal cord, responsible for processing and sending out nerve signals.

Peripheral Nervous System

The part of the nervous system that consists of the nerves and ganglia outside of the brain and spinal cord.

Autonomic

Pertaining to the autonomic nervous system, which controls involuntary body functions like heart rate and digestion.

Somatic Nervous Systems

A part of the peripheral nervous system associated with voluntary control of body movements via the use of skeletal muscles.