Why woulda company hedge?

Q: Explain what a “riskless hedge” is and how the riskless hedge concept is used in theBlack–Scholes…

A: Riskless hedging: It is the process of buying the stock as well as sell call options simultaneously…

Q: What Is Hedge against Marketplace Uncertainty?

A: Hedging is referred as the risk management strategy used to offset losses in investments by taking…

Q: What are some advantages and disadvantages of stockrepurchases?

A: Answer: Stock repurchases is nothing but the allocation of profits by a corporation to owners by…

Q: How can derivative security be used to hedge portfolio risk?

A: A derivative is depicted as an investment procedure outlined to assist the financial specialist to…

Q: What is a private placement? What are its potential advantages for the firm issuing securities?

A: Private placement is the sale of securities to a relatively small number of selected investors. It…

Q: What is an equivalent process of a money market hedge? Why?

A: Money market hedge A technique of utilizing the money market that has high liquidity, as well as…

Q: How would you use preferred and convertible instruments as investments to strengthen your portfolio?

A: Preferred instruments and convertible instruments are the instruments that are issued by the company…

Q: What are hedge funds?

A: Hedge fund : In simple words, an investment fund trading in liquid assets to make active returns is…

Q: What is the primary motivation for a forward stock split?

A: Here is the Answer

Q: What determines if a potentially dilutive security is dilutive or anti-dilutive? a. the share price…

A: Earning per share means the profit earned after taxes per share outstanding. Diluted earning per…

Q: What is Hedging Securities? Explain.

A: Hedging is a strategy where investors try to minimize the risk of loss on his portfolio by using…

Q: What are the advantages and disadvantages of preferred stock from the perspectiveof its issuer?

A: Answer: From the perspective of the issuing entity, the main benefit of preferred stock issuance…

Q: Explain how alternative investments can act as a hedge against inflation.

A: Alternative Investments:  Stocks, bonds are financial instruments that fall under the category of a…

Q: In what situation should a firm split its stock?

A: Firms generally split the stock when the price of the share becomes too high or exceeds the level…

Q: Why should investors be concerned about a firm’s outstandingwarrants and convertibles?

A: Answer: A warrant is a licensed instrument for granting the buyer the right to purchase a given…

Q: How do fundamental securities differ from derivatives

A: Fundamental securities and derivatives are actively traded in financial markets. The differences…

Q: What is equity security?

A: Bonds: Bonds are long-term promissory notes that are issued by a company while borrowing money from…

Q: Why is noncumulative preferred stock often considered anunattractive form of investment?

A: The expression "noncumulative" depicts a kind of preferred stock that doesn't pay investors any…

Q: hedge

A: Introduction: The term hedging refers to a strategy used by the investors in order to protect…

Q: What is hedge portfolio?

A: Hedge portfolio It consists of the long position in a security i.e stock and also the long position…

Q: Is it possible to view a firm's equity as an option? What could be the implications?

A: Let's recall the following two points:Basic accounting equation: Assets, A = Equity, E +…

Q: How does the diversification of an investor’s portfolio avoid risk?

A: Portfolio investments mean investments in the group of assets, securities, bonds, etc. Investments…

Q: how does the stock market work?

A: Stocks in the stock market represent ownership of equity in a public firm.

Q: How can an investor eliminate Unsystematic Risk?

A: There are two types of risks: 1) Systematic risk 2) Unsystematic risk. Systematic risk is non…

Q: Explain with examples how a firm can hedge its risks using options

A: Hedging : Hedging can be understood as the  technique for risk management used to mitigate…

Q: Explain the Use of Derivatives to Hedge Portfolio Risk?

A: The contract whose value derives from the fluctuation of values of the underlying assets is called…

Q: What is private placement of public equity (PIPE)?

A: When an investor buys shares of publicly traded companies at mutual and negotiated terms of…

Q: What are the advantages and disadvantages of preferred stock tothe issuer?

A: Preference shares, which are issued by companies seeking to raise capital, combine the…

Q: How do black swan events illustrate the limits of capital market theory

A: Black swan events are unexpected and unpredictable events. These events come as a surprise and are…

Q: why should a company invest in the stock of another company?

A: When a company invests in the stock of another company, it is known as Inter-corporate investments.

Q: What is the purpose of a fair value hedge?

A:

Q: How can an investor eliminate Systematic risk?

A: There are two types of risks: 1) Systematic risk 2) Unsystematic risk

Q: Why would a firm repurchase its stock? Discuss.

A: Repurchasing shares: It is also called buyback of shares. The company purchases its previously owned…

Q: Is the Stock Market Efficient?

A: Market efficiency can be defines as the extend up to which all the useful and important information…

Q: What is equity risk premium?

A: The risk premium is the extra return an investor receives for taking market risk. We know that risk…

Q: How should derivatives be used in risk management? What problems can occur?

A: Derivatives are financial instruments that have values derived from other assets like stocks, bonds,…

Q: What is the importance of market risk premium?

A: Market risk premium Variance of the market return and the risk-free rate. It depicts the equity…

Q: How are share repurchases an alternative to dividends, and why might investors prefer them

A: The share repurchase is the alternative to dividends because when a company repurchases it’s issued…

Q: Explain why a security is considered to be liquid and state its advantage to an investor

A: A liquid asset is a resource that can be quickly transformed within a short period of time into…