Which of the Following Statements About the Use of Futures

question 3

Multiple Choice

Which of the following statements about the use of futures in tactical asset allocation is correct?

• A)Implementing tactical asset allocation using futures is a form of market timing.
• B)Futures can be used to synthetically buy or sell stocks but you cannot simultaneously adjust the beta or duration
• C)A difference between the portfolio held and the index on which the futures is based will generate a gain for the investor.
• D)The use of futures in tactical asset allocation will generate cash from the synthetic sale,which is then used in the synthetic purchase.
• E)None of the above

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Definitions:

Price-Earnings Ratio

A financial ratio that measures a company's share price relative to its earnings per share, indicating investor expectations of growth and profitability.

Management Discussion And Analysis

A section in an annual report where management provides insight and perspective on the financial results, trends, and future outlook of the company.

Return On Stockholders' Equity

A financial ratio that measures a company's ability to generate profits from its shareholders' equity.

Return On Common Stockholders' Equity

A measure of financial performance that indicates how much net income a company generates with the money shareholders have invested.