International Financial Management
14th Edition
ISBN: 9780357130698
Author: Madura
Publisher: Cengage
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Which hedging method would produce the best result for the hedger if markets were efficient
When comparing the forward hedge to the money market hedge, the MNC can easily determine which hedge is more desirable, because the cost of each hedge can be determined with certainty.
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True
False
How might the incentive fee of a hedge fund affect the manager’s proclivity to take on high-risk assets in the portfolio?
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- What is the best ways or strategies for a company to hedge the funds in order to eliminate the risk or lose profit?arrow_forwardGive the difference between hedge funds and money market funds.arrow_forwardResearch shows that publicly available information such as dividend yields can ve used to predict future security returns.explain three forms of the efficient market hypothesis and discuss whether this fact violates any form of market efficiencu.arrow_forward
- Would a market-neutral hedge fund be a good candidate for an investor’s entire retirement portfolio? If not, would there be a role for the hedge fund in the overall portfolio of such an investor?arrow_forwardExplain how a speculator can make speculation in spot, forward, and options markets. Which one do you think is more advantageous? Explain by making a comparison among these alternatives.arrow_forwardMarket timers focus onusing overall market trends as a basis for predicting when to buy or sell investments. However, they can use valuation techniques on specific financial instruments to support their decision. True or false?arrow_forward
- A hedge fund purchased credit default swaps on securities it did not own because it believed that the securities were likely to default. In this example, the hedge fund is speculating or hedging?arrow_forwardWhich of the following is NOT an assumption used in deriving the Capital Asset Pricing Model (CAPM)? Investors can buy and sell all securities at competitive market prices without incurring taxes or transactions cost and can borrow and lend at the risk-free interest rate Investors hold only efficient portfolios of traded securities. Investors have homogeneous expectations regarding the volatilities, correlation, and expected returns of securities. Investors have homogeneous risk averse preferences toward taking on risk.arrow_forwardWhich of the following hedge fund types is most likely to have a return that is closest to risk-free?a. A market-neutral hedge fund.b. An event-driven hedge fund.c. A long/short hedge fund.arrow_forward
- Describe the process of a money market hedge for payables. Do not rewrite the formula, explain it.arrow_forwardSuggest what is the best financial instrument to offset market risk exposure and from market volatility? WHY?arrow_forwardWhat are the two ways a sinking fund can be handled? Whichmethod will be chosen by the firm if interest rates have risen? Ifinterest rates have fallen?arrow_forward
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