Which one of the following statements regarding hedging is true?
A) Hedging is adding securities to an existing portfolio to increase the overall return.
B) Hedging is a strategy used by investors to increase both the risk and return of a portfolio.
C) Hedging is a strategy used by investors to reduce the risk of a portfolio.
D) Hedging is a strategy used to increase portfolio volatility.
E) None of these is true.
Correct Answer:
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