- CFA Exams
- CFA Level I Exam
- Study Session 16. Derivatives
- Reading 48. Derivative Markets and Instruments
- Subject 5. Purposes and Criticisms of Derivative Markets
CFA Practice Question
The goal of an investor following a risk management strategy is to ______.
A. increase risk because doing so will increase expected return
B. control or reduce risk even though doing so will increase expected return
C. control or reduce risk even though doing so will decrease expected return
Explanation: Risk management or hedging seeks to reduce risk. In a well-functioning market, decreased risk is associated with decreased expected return.
User Contributed Comments 2
| User | Comment |
|---|---|
| kellyyang | High risk plus high return; lower risk, lower return. |
| fobucina | Turtles + Tupac = Great Evening |