Because most hedging acts to reduce risk, managers should expect that hedging will:
A) increase profits.
B) decrease profits.
C) increase the firm's stock price.
D)stabilize the firm's dividend payout.

Question

Quizplus · Accepted Answer

Hedging involves taking a position in a financial instrument that will offset potential losses in another position. While this can reduce risk, it can also limit potential profits. Therefore, managers should expect that hedging will decrease profits.

Because Most Hedging Acts to Reduce Risk, Managers Should Expect