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Chap025 - Chapter 25 Derivatives and Hedging Risk Chapter...

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Chapter 25 - Derivatives and Hedging Risk Chapter 25 Derivatives and Hedging Risk Multiple Choice Questions 1. A derivative is a financial instrument whose value is determined by: A. a regulatory body such as the FTC. B. a primitive or underlying asset. C. hedging a risk. D. hedging a speculation. E. None of the above. 2. Derivatives can be used to either hedge or speculate. These actions: 3. A forward contract is described by: 4. The buyer of a forward contract: 25-1
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Chapter 25 - Derivatives and Hedging Risk 5. The main difference between a forward contract and a cash transaction is: A. only the cash transaction creates an obligation to perform. B. a forward is performed at a later date while the cash transaction is performed immediately. C. only one involves a deliverable instrument. D. neither allows for hedging. E. None of the above. 6. Futures contracts contrast with forward contracts by: 7. Which of the following is true about the user of derivatives?
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