Question

Explain whether the following statements are true or false.

(a) Derivative transactions are designed to increase risk and are used almost exclusively by speculators who are looking to capture high returns.
(b) Hedge funds typically have large minimum investments and are marketed to institutions and individuals with high net worths.
(c) Hedge funds have traditionally been highly regulated.
(d) The New York Stock Exchange is an example of a stock exchange that has a physical location.
(e) A larger bid-ask spread means that the dealer will realize a lower profit.

Answer 1

Answer:

1. FALSE
2. TRUE
3. FALSE
4. TRUE
5. FALSE

Explanation:

• Usually, derivative transactions are being used to hedge transactions so that decreased risk and used to increase the high returns, so the following statement is FALSE.
• This statement is TRUE as hedge funds have typically had a minimum offer of the sum above $1 million.
• This statement is FALSE as we can see that Hedge Funds are mostly uncontrolled on the market, on the other side we might argue that mutual funds are highly regulated.
• this statement is TRUE because,The geographical location of the New York Stock Exchange is in New York.
• this statement is FALSE, because the bid starts from, where the seller wants his minimum profit.