Please answer the question below with True or False:

1. A hedge reduces risk because the futures price is less volatile than the spot price.

2. Stock index futures contracts are terminated by delivering the portfolio of stocks represented by the index.

3. Consider a 3-month forward contract on IBM. Suppose that current stock price of IBM is $152. IBM is going to issue $2 dividend in one month. Then the fair forward price is equal to the future value of $152 minus the future value of $2.

4. A convenience yield is an explanation for a negative cost of carry.