By hedging a portfolio ; an investora.Reduces interest rate riskb.Increases re investment riskc.Increases exchange rate riskd.None of these

By hedging a portfolio, an investor:

a. Reduces interest rate risk b. Increases reinvestment risk c. Increases exchange rate risk d. None of these

To answer this question step by step:

1. Hedging a portfolio refers to taking measures to protect the portfolio from potential risks and uncertainties.
2. The first option, reducing interest rate risk, means that by hedging, the investor can minimize the impact of changes in interest rates on the portfolio's value. This can be achieved through various strategies such as using interest rate derivatives or diversifying the portfolio.
3. The second option, increasing reinvestment risk, is not a typical outcome of hedging. Hedging is usually done to mitigate risks, not to increase them. Reinvestment risk refers to the risk of not being able to reinvest cash flows at the same rate of return as the original investment.
4. The third option, increasing exchange rate risk, is also not a typical outcome of hedging. Hedging is often used to manage exchange rate risk by using currency derivatives or other strategies to protect against adverse currency movements.
5. Therefore, the correct answer is option a: By hedging a portfolio, an investor reduces interest rate risk.
6. Option b and c are incorrect, as hedging does not typically increase reinvestment risk or exchange rate risk.
7. Option d, none of these, is also incorrect, as hedging does have an impact on interest rate risk.

In conclusion, by hedging a portfolio, an investor can reduce interest rate risk.