Problem $3\mathrm{.}1.$ Under what circumstances are $($a$)$ a short hedge and $($b$)$ a long hedge appropriate? Problem $3\mathrm{.}2.$ Explain what is meant by basis risk when futures contracts are used for hedging. Problem $3\mathrm{.}3.$ Explain what is meant by a perfect hedge. Does a perfect hedge always lead to a better outcome than an imperfect hedge? Explain your answer. Problem $3\mathrm{.}4.$ Under what circumstances does a minimum$-$variance hedge portfolio lead to no hedging at all? Problem $3\mathrm{.}5.$ Give three reasons why the treasurer of a company might not hedge the company$$s exposure to a particular risk.