Sometimes spreading has an advantage over hedging to lower risk because:
A) it can be difficult to find assets that move predictably in opposite directions.
B) it is cheaper to spread than hedge.
C) spreading increases expected returns, hedging does not.
D) spreading does not affect expected returns.

Question

Quizplus · Accepted Answer

It can be difficult to find assets that move predictably in opposite directions, which makes hedging less effective. On the other hand, spreading involves diversifying across different assets or markets, which can reduce risk without relying solely on one hedge.

Sometimes Spreading Has an Advantage Over Hedging to Lower Risk