What Reason Might Be Given for Not Wanting to Hedge

question 12

Short Answer

What reason might be given for not wanting to hedge the future issuance of a liability if interest rates are unusually high?
A)you are locking in a high rate
A)the margin cost will be expensive
B)transaction costs are higher
D)futures prices are lower
E)none of the above

• A)you are locking in a high rate
• A)the margin cost will be expensive
• B)transaction costs are higher
• D)futures prices are lower
• E)none of the above

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Definitions:

Standard Deviation

A measure of the amount of variation or dispersion of a set of values, indicating how much the values in a data set deviate from the mean.

Mean High Temperature

Mean high temperature is the average of the highest temperatures over a specific time period for a particular place.

Book Value

The net value of an asset according to its balance sheet account balance, calculated as the original cost minus accumulated depreciation.

Variable Manufacturing Costs

Expenses that change in proportion to the amount of goods or services produced, including direct materials and labor.