In which of the following situations would you use a short hedge?
A)the planned purchase of a stock
B)the planned purchase of commercial paper
C)the planned issuance of bonds
D)the planned repurchase of stock to cover a short position
E)none of the above

Question

Quizplus · Accepted Answer

A short hedge is used to protect against a potential decrease in the value of an asset. In the case of planned issuance of bonds, a short hedge can be used to protect against the risk of interest rates rising, which would decrease the value of the bonds being issued.

In Which of the Following Situations Would You Use a Short