Question
Which of the following statements is true? I) Airlines should decide whether or not to hedge their purchases of jet fuel using crude oil futures
Which of the following statements is true?
I) Airlines should decide whether or not to hedge their purchases of jet fuel using crude oil futures based on their expert assessment of future changes in the international price of oil. For example, if, based on their expertise, the airline CFO thinks oil prices will increase, the firm should should hedge, otherwise it should not.
II) Modigliani-Miller's homemade hedging argument asserts that, under certain assumptions, financial hedging does not create shareholder value because shareholders can decide to hedge on their own using the same derivative instruments and at the same prices available to the firm.
I only. | ||
II only. | ||
I and II. | ||
None. |
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