1. Which of the following statements about the usefulness of derivatives in practice is least accurate?
A) A long only equity portfolio manager chooses to hedge market risk by purchasing stock index futures
B) A short only equity hedge fund chooses to lock in stock selection by purchasing stock index futures
C) A company who needs to buy or sell a commodity asset in the future may choose to enter a hedge
D) A long only equity portfolio manager chooses to hedge market risk by selling stock index futures
E) Arbitrageurs, who look to earn a riskless profit, help stabilize asset prices in the capital markets
2. Let’s assume that the NPV for project X is $75.50, while be in NPV for project Y is $82.75. If you could only accept one of the projects, which would you choose?
A. Project Y
B. Neither becaue NPV > $50 for both projects
C. Project X
D. Neither because NPV < $100 for both projects