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116
Which of the following is true?
A.Hedging can always be done more easily by a company’s shareholders than by the company itself
B.If all companies in an industry hedge, a company in the industry can sometimes reduce its risk by choosing not to hedge
C.If all companies in an industry do not hedge, a company in the industry can reduce its risk by hedging
D.If all companies in an industry do not hedge, a company is liable increase its risk by hedging
A.Hedging can always be done more easily by a company’s shareholders than by the company itself
B.If all companies in an industry hedge, a company in the industry can sometimes reduce its risk by choosing not to hedge
C.If all companies in an industry do not hedge, a company in the industry can reduce its risk by hedging
D.If all companies in an industry do not hedge, a company is liable increase its risk by hedging
Answer: D
If all companies in a industry hedge, the prices of the end product tends to reflect movements in relevant market variables. Attempting to hedge those movements can therefore increase risk.
If all companies in a industry hedge, the prices of the end product tends to reflect movements in relevant market variables. Attempting to hedge those movements can therefore increase risk.
Flashcard info:
Author: CoboCards-User
Main topic: Finance & Investment
Topic: Derivatives
Published: 27.10.2015