An investor practicing hedging would be most likely to:
A) avoid the stock market and focus on bonds.
B) purchase shares in general motors and buy U.S. treasury bonds.
C) purchase shares in general motors and Amoco oil.
D) put his/her invested funds in CDs.

Question

Quizplus · Accepted Answer

The investor is most likely to purchase shares in two different companies, in this case, General Motors and Amoco Oil. This is because hedging involves reducing investment risk by diversifying the portfolio. By investing in two companies in different industries, the investor is minimizing the impact of any negative event that may occur in one industry.

An Investor Practicing Hedging Would Be Most Likely To