Question $1($Mandatory$)(5$ points$)$

The following questions are based on the Dionne textbook Chapter $3$ "Risk

Management and Investment Financing".

Which one of the following statements is not correct?

A$)$ Nonlinear risk management instruments provide more precise results in risk

hedging than do linear instruments.

B$)$ The higher the $($positive$)$ correlations between cash flows and investment

opportunities, the less businesses will need to hedge.

C$)$ Firms will hedge less if the cash flows and value of the collateral are strongly

correlated.

D$)$ Firms will hedge more if risk management increases their borrowing

opportunities.