A Hedge Fund Is Similar to a Mutual Fund in That

question 68

Multiple Choice

A hedge fund is similar to a mutual fund in that it invests funds on behalf of clients.Select the notable difference between hedge funds and mutual funds from the following choices?

• A)​Hedge funds have to register under U.S.federal securities law.
• B)​Hedge funds do not publicly offer their securities.
• C)​Mutual funds and not hedge funds have all sophisticated investors and thus are subject to more regulations.
• D)​Unlike mutual funds, rarely do hedge funds use derivatives for speculation.

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Definitions:

Diminishing Returns

The principle stating that if one factor of production is increased while others remain constant, the overall returns will initially increase but there will come a point where the added benefits will start to decrease.

Increasing Returns

An increase in firm’s output by a larger percentage than the percentage increase in its inputs.

MC

Marginal Cost, the change in total production cost that comes from making or producing one additional unit.

ATC

Average Total Cost, which is the total cost divided by the number of goods produced, representing the per-unit production cost.