a) While both hedging and diversification are risk management tools, explain why hedging is the preferred tool for corporate risk management.b) Describe the role of ex-dividend date in the payment of cash dividend.c) How are American options different from the European options? Which one of them is likely to have a higher value? Why?

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Answered: While both hedging and diversification…

While both hedging and diversification are risk management tools, explain why hedging is the preferred tool for corporate risk management.

Understanding Business

12th Edition

ISBN:9781259929434

Author:William Nickels

Publisher:William Nickels

Chapter1: Taking Risks And Making Profits Within The Dynamic Business Environment

Section: Chapter Questions

Problem 1CE

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