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Question
Suppose a portfolio consisting of the long position in the asset and the short position in the call option is riskless and will produce a return that equals the risk-free interest rate. A portfolio constructed in this way is called ________.A) a risk-reduced portfolio.
B) an unhedged portfolio.
C) a hedged portfolio.
D) a speculative portfolio.
Answer
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Related questions
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A ceiling is created by buying an interest rate cap and selling an interest rate floor.
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If at the settlement date the settlement rate is ________ the contract rate, the FRA buyer ________ because the buyer can borrow funds at a below-market rate.
A) equal to; suffers
B) greater than; suffers
C) less than; benefits
D) greater than; benefits
Q:
The FRA's ________ is the rate specified in the FRA at which the buyer of the FRA agrees to pay for funds and the seller of the FRA agrees to receive for investing funds.
A) reference rate
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Q:
The elements of an FRA are the ________.
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Q:
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Suppose that a money manager knows that bonds are maturing in the near future and expects interest rates to fall. ________ can be purchased in this situation.
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Suppose that a pension fund manager knows that bonds must be liquidated in 40 days to make a $5 million payment to the beneficiaries of the pension fund. If interest rates rise in 40 days, more bonds will have to be liquidated to realize $5 million. The hedger will buy put options thus following ________.
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Q:
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B) stock index futures or stocks.
C) stock index futures or a riskless asset.
D) stock index futures or stocks and a riskless asset.
Q:
Institutional investors can use stock index futures for seven distinct investment strategies. These include ________.
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B) hedging against adverse stock price movements.
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Q:
To show how to calculate the hedge ratio, we use notation that includes the following: ________.
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B) Cd = intrinsic value of the call option if the asset price goes up and E = strike price of the call option.
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Q:
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D) greater; the standard deviation
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The exchange rate between the U.S. dollar and the euro can be quoted as ________.
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The fundamental fact of international finance is that different countries issue different currencies, and the relative values of those currencies may change ________.
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C) as a response to political events that make no economic sense.
D) All of these