1. Hedging risk for a long position is accomplished by

A. taking another long position.

B. taking a short position.

C. Taking additional long and short positions in equal amounts.

D. taking a neutral position.

2. A disadvantage of a forward contract is that

A.it may be difficult to locate a counterparty.

B. the forward market suffers from lack of liquidity.

C. these contracts have default risk.

D. all of the above.

3. By selling short a futures contract of $100,000 at a price of 115 you are agreeing to deliver

A.$100,000 face value securities for $115,000.

B.$115,000 face value securities for $110,000.

C.$100,000 face value securities for $100,000.

D.$115,000 face value securities for $115,000.

4. When a financial institution hedges the interest-rate risk for a specific asset, the hedge is called a

A. macro hedge.

B. micro hedge.

C. cross hedge.

D. futures hedge.