Respond that the following statements are true or false:

(a) In the real-world, financial decisions are irrelevant, so there is really no reason for firms to hedge.

(b) An investor that expects to buy bonds in the future would use a short hedge to protect against interest rate changes.

(c) An investor who expects to sell stock at a later date would use a short hedge to protect against stock price movements.

(d) A hedge of a specific stock's price with stock index futures will reduce both systematic and unsystematic risk.

Answer rating: 100% (QA)

a False imperfections exists in the market and hedging helps to reduce the losses utilizing the i... View the full answer