Chapter 24, Problem 1QP

a.

Summary Introduction

To discuss: The statement that is classified under true or false.

Answer to Problem 1QP

The statement is classified as “True”.

Explanation of Solution

The statement that is classified under true is as follows:

A zero-sum game is a term to depict a circumstance where the increase of one player is balanced by the loss of another player, expressing the total of zero

Therefore, the given statement is classified as “True”.

b.

Summary Introduction

To discuss: The statement that is classified under true or false.

Answer to Problem 1QP

The statement is classified as “False”.

Explanation of Solution

The reasons supporting the statement to be false are as follows:

By reducing the risk there are no chances of increasing the value of the firm.

Therefore, the given statement is classified as “False”.

c.

Summary Introduction

To discuss: The statement that is classified under true or false.

Answer to Problem 1QP

The statement is classified as “True”.

Explanation of Solution

The reasons supporting the statement to be true are as follows:

It is likewise indicated that hedging lessens likelihood of money related issues through decreasing the tax payments.

Therefore, the given statement is classified as “True”.

d.

Summary Introduction

To discuss: The statement that is classified under true or false.

Answer to Problem 1QP

The statement is classified as “True”.

Explanation of Solution

The reasons supporting the statement to be true are as follows:

The investors in mutual funds may end up paying for index like returns that could be acquired for lower expenses or wind up paying for returns that reflect short-term volatility as opposed to supervisor ability.

Therefore, the given statement is classified as “True”.

e.

Summary Introduction

To discuss: The statement that is classified under true or false.

Answer to Problem 1QP

The statement is classified as “True”.

Explanation of Solution

The reasons supporting the statement to be true are as follows:

By figuring an integrated strategy that joins the creation and exercise of real options along with other risk management strategies, the board can lessen risk and in this way increment firm’s worth.

Therefore, the given statement is classified as “True”.

f.

Summary Introduction

To discuss: The statement that is classified under true or false.

Answer to Problem 1QP

The statement is classified as “False”.

Explanation of Solution

The reasons supporting the statement to be false are as follows:

Preferred stock is not considered as a form of financial derivatives. Derivative comprise of futures, forwards and swaps.

Therefore, the given statement is classified as “False”.