Usefulness of derivatives in practice is least accurate

Assignment Help Financial Management

Reference no: EM131844004

1. Which of the following statements about the usefulness of derivatives in practice is least accurate?

A) A long only equity portfolio manager chooses to hedge market risk by purchasing stock index futures

B) A short only equity hedge fund chooses to lock in stock selection by purchasing stock index futures

C) A company who needs to buy or sell a commodity asset in the future may choose to enter a hedge

D) A long only equity portfolio manager chooses to hedge market risk by selling stock index futures

E) Arbitrageurs, who look to earn a riskless profit, help stabilize asset prices in the capital markets

2. Let’s assume that the NPV for project X is $75.50, while be in NPV for project Y is $82.75. If you could only accept one of the projects, which would you choose?

A. Project Y

B. Neither becaue NPV > $50 for both projects

C. Project X

D. Neither because NPV < $100 for both projects

Reference no: EM131844004

Questions Cloud

Calculate the futures price of the index : The S&P 500 just closed at 2500 (T=0) and has continuously compounded annual dividend yield of 2.0%. you will need to calculate the futures price of the index.

What is its current market value : If the market rate on the CD falls to 8.25 percent, what is its current market value?

Using the profitability index when evaluating projects : Gold Mining, Inc. is using the profitability index (PI) when evaluating projects.

What is the internal rate of return for project : What is the internal rate of return for project X? what is the payback period for project X?

Usefulness of derivatives in practice is least accurate : Which of the following statements about the usefulness of derivatives in practice is least accurate?

Bond is the interest rate you earn on your investment : The YTM on a bond is the interest rate you earn on your investment if interest rates don’t change.

Any futures contract used to hedge have ample liquidity : United requires that any futures contract used to hedge have ample liquidity, what would be United’s best course of action?

What is the percentage change in the price of the bond : Jay, Inc. has 7% coupon bonds outstanding with semiannual payments and is priced at par value. what is the percentage change in the price of the bond?

Industry who decides to hedge the need to purchase jet fuel : Assume United is the only airline in the industry who decides to hedge the need to purchase jet fuel.

User Account

All Pages