Which of the Following Statements Is Not True About Fair

question 20

Multiple Choice

Which of the following statements is not true about fair value hedges?

• A)it requires identification of the effective and ineffective parts
• B)derivatives profits and losses are temporarily carried in an equity account
• C)it requires proper documentation
• D)only dealer firms are eligible to use it
• E)none of the above

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Definitions:

Standard Deviation

A measure of the dispersion or variability around the mean (average) of a set of data points.

Total Risk

The complete range of risks an investment or project may face, encompassing both systematic (market-wide) and unsystematic (company-specific) risks.

SML

The Security Market Line, a graphical representation of the Capital Asset Pricing Model that plots the expected return of the market at varying levels of systematic or market risk.

Beta

A metric that compares the level of risk and volatility of an individual security or portfolio to that of the general market.