SIE Understanding Products and Their Risks Practice Question 84

Correct Answer: C

Explanation:

C: Choice C is correct because the hedge fund may use focused investments in a specific firm or industry rather than diversification, arbitrage (buying and selling an asset in two markets or two assets at the same time), short selling (borrowing an asset and selling it), trading in currency or commodities, or margin (borrowing funds to purchase assets). Choice A is incorrect because the investment is not registered with the SEC, or else the subscription agreement would not be necessary, as a prospectus would describe the investment's risks and characteristics. Choice B is incorrect because the subscription agreement explains why the investment is not registered with the SEC. Choice D is incorrect because the minimum investment may be $100,000 or as much as $1,000,000.