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By reducing the risk of financial distress and bankruptcy, a firms use of derivatives contracts to hedge its cash flow uncertainty will: (a) Lower its
By reducing the risk of financial distress and bankruptcy, a firms use of derivatives contracts to hedge its cash flow uncertainty will:
(a) Lower its value since investors can always hedge such risks by themselves.
(b) Lower its value due to the transaction costs of derivatives trading.
(c) Have no impact on its value as investors can costlessly diversify this risk.
(d) Enhance its value by hedging systematic risks
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