Molly invests in stocks and bonds, which have the possibility of a gain or a loss. What can be used to cover her possible losses from fluctuating prices?
A) a financial derivative
B) an insurance policy
C) a government promise
D) a speculative contract
E) an insurance option

Question

Quizplus · Accepted Answer

Although insurance companies do not cover losses on a speculative investment, Molly can use a product called a financial derivative, such as options and futures contracts, to cover possible losses from fluctuating prices. When used properly, an investor can hedge (offset) either all or some of the losses by using these financial derivatives.

Molly Invests in Stocks and Bonds, Which Have the Possibility