The Primary Difference Between an Entity Trying to Hedge Interest

question 2

Multiple Choice

The primary difference between an entity trying to hedge interest rate risk versus a speculator in that same financial futures contract is that the hedger is

• A)trying to protect a present or anticipated cash position
• B)trying to profit from interest rate movements
• C)trying to guess what the interest rates will be at the expiration of the contract
• D)trying to use the contract to avoid taxes

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Definitions:

Health Problems

Physical or mental conditions that impair a person's well-being, ranging from minor illnesses to chronic diseases.

Quantity Supplied

The amount of a good or service that producers are willing and able to sell at a particular price over a given period of time.

Technological Advance

The development and application of innovative tools, machines, materials, and processes, improving efficiency and productivity.

Supply Increase

A shift to the right in the supply curve, indicating that producers are willing and able to sell more of the good at each possible price.