The definitions of a hedge, a long position and a short position Context Introduction: Hedge − To lower the risks of unfavorable movements in prices of assets, the investment that is made is a hedge.

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Answer 1

Question

Chapter 14, Problem 1LO

To determine

The definitions of a hedge, a long position and a short position

Context Introduction:

Hedge − To lower the risks of unfavorable movements in prices of assets, the investment that is made is a hedge.

Expert Solution & Answer

Explanation of Solution

Hedge funds − The Investment institutions and individuals having a high net worth investment in a lot of securities like bonds, stocks, real estate etc., and this prevalent investment vehicle is called Hedge fund. These funds which are highly risky in comparison to the commonly available investments like mutual funds, aim for excessive returns.

Long position − Buying stocks and owning the stocks are referred to as long position. With the expectation that an asset value would increase in future, buying securities like stocks are referred to as long position.

Short position − The investment tactic of selling stocks, not owned or stocks borrowed in the open market is referred to as a short position.

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Consider the table below, which has data on insurance status and medical expenditures for different types of professors at Hypothetical University (HU), economics & criminology professors. Assume that there are an equal number of economics and criminology professors. Assume further that econ professors all have the same level of health and criminology professors all have the same level of health. There is evidence of 2021 Insured? Avg. Expenditures Insured? Avg. Expenditures 2020 Economics Professors Criminology Professors Yes. Yes $25,000 $15,000 0000 ??? ??? $28,000 $10,000 I. moral hazard because in 2021 criminology professors dropped their coverage and health expenditures went down. II. adverse selection because in response to rising premiums after 2020, the professors with lower health expenditure dropped coverage Both I and II neither I nor II

Answer 2

Question

Chapter 14, Problem 1LO

To determine

The definitions of a hedge, a long position and a short position

Context Introduction:

Hedge − To lower the risks of unfavorable movements in prices of assets, the investment that is made is a hedge.

Expert Solution & Answer

Explanation of Solution

Hedge funds − The Investment institutions and individuals having a high net worth investment in a lot of securities like bonds, stocks, real estate etc., and this prevalent investment vehicle is called Hedge fund. These funds which are highly risky in comparison to the commonly available investments like mutual funds, aim for excessive returns.

Long position − Buying stocks and owning the stocks are referred to as long position. With the expectation that an asset value would increase in future, buying securities like stocks are referred to as long position.

Short position − The investment tactic of selling stocks, not owned or stocks borrowed in the open market is referred to as a short position.

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Answer 3

Question

Chapter 14, Problem 1LO

To determine

The definitions of a hedge, a long position and a short position

Context Introduction:

Hedge − To lower the risks of unfavorable movements in prices of assets, the investment that is made is a hedge.

Expert Solution & Answer

Explanation of Solution

Hedge funds − The Investment institutions and individuals having a high net worth investment in a lot of securities like bonds, stocks, real estate etc., and this prevalent investment vehicle is called Hedge fund. These funds which are highly risky in comparison to the commonly available investments like mutual funds, aim for excessive returns.

Long position − Buying stocks and owning the stocks are referred to as long position. With the expectation that an asset value would increase in future, buying securities like stocks are referred to as long position.

Short position − The investment tactic of selling stocks, not owned or stocks borrowed in the open market is referred to as a short position.

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Answer 4

Question

Chapter 14, Problem 1LO

To determine

The definitions of a hedge, a long position and a short position

Context Introduction:

Hedge − To lower the risks of unfavorable movements in prices of assets, the investment that is made is a hedge.

Expert Solution & Answer

Explanation of Solution

Hedge funds − The Investment institutions and individuals having a high net worth investment in a lot of securities like bonds, stocks, real estate etc., and this prevalent investment vehicle is called Hedge fund. These funds which are highly risky in comparison to the commonly available investments like mutual funds, aim for excessive returns.

Long position − Buying stocks and owning the stocks are referred to as long position. With the expectation that an asset value would increase in future, buying securities like stocks are referred to as long position.

Short position − The investment tactic of selling stocks, not owned or stocks borrowed in the open market is referred to as a short position.

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Answer 5

Chapter 14, Problem 1LO

To determine

The definitions of a hedge, a long position and a short position

Context Introduction:

Hedge − To lower the risks of unfavorable movements in prices of assets, the investment that is made is a hedge.

Expert Solution & Answer

Explanation of Solution

Hedge funds − The Investment institutions and individuals having a high net worth investment in a lot of securities like bonds, stocks, real estate etc., and this prevalent investment vehicle is called Hedge fund. These funds which are highly risky in comparison to the commonly available investments like mutual funds, aim for excessive returns.

Long position − Buying stocks and owning the stocks are referred to as long position. With the expectation that an asset value would increase in future, buying securities like stocks are referred to as long position.

Short position − The investment tactic of selling stocks, not owned or stocks borrowed in the open market is referred to as a short position.

Answer 6

Chapter 14, Problem 1LO

To determine

The definitions of a hedge, a long position and a short position

Context Introduction:

Hedge − To lower the risks of unfavorable movements in prices of assets, the investment that is made is a hedge.

Expert Solution & Answer

Explanation of Solution

Hedge funds − The Investment institutions and individuals having a high net worth investment in a lot of securities like bonds, stocks, real estate etc., and this prevalent investment vehicle is called Hedge fund. These funds which are highly risky in comparison to the commonly available investments like mutual funds, aim for excessive returns.

Long position − Buying stocks and owning the stocks are referred to as long position. With the expectation that an asset value would increase in future, buying securities like stocks are referred to as long position.

Short position − The investment tactic of selling stocks, not owned or stocks borrowed in the open market is referred to as a short position.

Answer 7

Chapter 14, Problem 1LO

To determine

The definitions of a hedge, a long position and a short position

Context Introduction:

Hedge − To lower the risks of unfavorable movements in prices of assets, the investment that is made is a hedge.

Answer 8

Expert Solution & Answer

Explanation of Solution

Hedge funds − The Investment institutions and individuals having a high net worth investment in a lot of securities like bonds, stocks, real estate etc., and this prevalent investment vehicle is called Hedge fund. These funds which are highly risky in comparison to the commonly available investments like mutual funds, aim for excessive returns.

Long position − Buying stocks and owning the stocks are referred to as long position. With the expectation that an asset value would increase in future, buying securities like stocks are referred to as long position.

Short position − The investment tactic of selling stocks, not owned or stocks borrowed in the open market is referred to as a short position.

Answer 9

Expert Solution & Answer

Answer 10

Expert Solution & Answer

Answer 11

Ch. 14 - Prob. 1LO Ch. 14 - Prob. 2LO Ch. 14 - Prob. 3LO Ch. 14 - Prob. 4LO Ch. 14 - Prob. 5LO Ch. 14 - Prob. 6LO Ch. 14 - Prob. 1Q Ch. 14 - Prob. 2Q Ch. 14 - Prob. 3Q Ch. 14 - Prob. 4Q

The definitions of a hedge, a long position and a short position Context Introduction: Hedge − To lower the risks of unfavorable movements in prices of assets, the investment that is made is a hedge.

The definitions of a hedge, a long position and a short position Context Introduction: Hedge − To lower the risks of unfavorable movements in prices of assets, the investment that is made is a hedge.

Explanation of Solution

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Chapter 14 Solutions

The definitions of a hedge, a long position and a short position

Context Introduction:

Hedge − To lower the risks of unfavorable movements in prices of assets, the investment that is made is a hedge.