5- Which of the following statements concerning hedging are correct?

I. Hedging done for individual risks without looking at the firm as a portfolio of risks can increase the overall risk of a firm.

II. Hedging allows the firm to react to fundamental changes in market conditions.

III. Hedging provides protection, at least to some degree, from transitory price fluctuations.

A) I only

B) II only

C) III only

D) I and III only

E) I, II, and III

6- A firm has a risk profile of a seller. In order to eliminate the downside risk, the firm should:

A) Sell a put option.

B) Sell a call option.

C) Buy a put option.

D) Buy a call option.

E) Buy a call option and sell a put option.

9- Short-run financial risk arising from the need to buy or sell at uncertain prices or rates in the near future is called __________________.

A) risk maximization

B) volatility maximization

C) economic exposure

D) translation exposure

E) transactions exposure