If managers are rational, they will only hedge when they perceive that:
A)Prices are headed in an adverse direction
B)Derivative instruments are priced lower than actual value
C)Risk reduction is preferable to higher potential profits
D)They can increase their profitability by doing so

Question

Quizplus · Accepted Answer

Managers hedge to reduce risk, prioritizing stability over potentially higher profits that come with higher risk.

If Managers Are Rational, They Will Only Hedge When They