CFA Practice Question

There are 206 practice questions for this study session.

CFA Practice Question

A hedger takes a position in the futures market in order to ______.

A. increase a pre-existing risk in search of higher returns
B. decrease a pre-existing risk in search of higher return
C. decrease a pre-existing risk even though doing so may decrease returns
Correct Answer: C

By definition, a hedger acts as described in C.

User Contributed Comments 4

User Comment
viannie Hedge = decrease pre-existing risks which reduces loss but at the same time, reduces returns. (Something got to give, reduce loss but also reduce gains)
ankurwa10 remember, there are no free lunches? You can't have it all.
dbedford Think of it like an investor who buys bonds in thier portfolio to hedge against market risk. Risk goes down for the portfolio and so does potential overall return
khalifa92 good example
You need to log in first to add your comment.