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Which of the Following Statements Is True

Question 48

Multiple Choice

Which of the following statements is true?


A) Over-hedging will lead to a significant reduction in risk, but also in returns.
B) In terms of risk and return, there is a linear relationship between an unhedged, a selectively hedged, a fully hedged and an over-hedged position.
C) It is not possible to over-hedge a position.
D) Over-hedging will lead to a significant reduction in risk, but also in returns, in terms of risk and return, there is a linear relationship between an unhedged, a selectively hedged, a fully hedged and an over-hedged position and it is not possible to over-hedge a position.

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