n NISM Certifications
VIII NISM Series VIII
Medium

Everest Mutual Fund had floated a new fund offer and received Rs. 500 crores from the investors. The fund manager of this fund is planning to invest this amount over the next one month in buying 25 high growth stocks. He can hedge the risk in this planned purchase of stock by executing __________ .

Practice question from NISM Series VIII - Mock Test 1 — bank. The correct answer is highlighted below with a full explanation.

Options

  1. A

    A long hedge using put options on each of the 25 stocks

  2. B

    A short hedge using future contracts on each of the 25 stocks

  3. A long hedge using index futures

    Correct answer

  4. D

    A short hedge using index futures

A full explanation for this question is being written. In the meantime, the correct answer is highlighted above.

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NISM Series VIII - Mock Test 1