Question

The payoff profile resulting from a perfect hedge with a forward contract is O A downward-sloping...

The payoff profile resulting from a perfect hedge with a forward contract is _______ 

  • A downward-sloping curve. 

  • An upward-sloping curve 

  • A downward-sloping straight line.  

  • A horizontal straight line. 

  • An upward-sloping straight line.

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Answer #1

A horizontal straight line

With perfect hedge, position will be risk free and payoff will be a horizontal line.

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