CFA Practice Question

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CFA Practice Question

Which statement is TRUE?

A. A hedge is to reduce risk.
B. Risk modification is strictly risk reduction or prevention.
C. Risk mitigation methods are mutually exclusive.
Correct Answer: A

B is false. Sometimes risk management requires increasing risk.

Risk mitigation methods are not mutually exclusive. Many organizations use all methods to some extent.

User Contributed Comments 2

User Comment
10425406 Does risk modification include increasing risk?
rojaslav Yes, a company could be interested in increasing its risk for the sake of potential higher returns/better outcomes if they are willing to accept the additional risk
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