Which of the Following Describes a Perfect Hedge

question 100

Multiple Choice

Which of the following describes a perfect hedge?

• A) On net, the hedger can only make money if prices change.
• B) On net, the hedger can only lose money if prices change.
• C) On net, the hedger can either make or lose money if prices change.
• D) On net, the hedger can neither make nor lose money if prices change.
• E) On net, prices will not change, so hedging is a worthless exercise.

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Definitions:

Trial Balance

A bookkeeping worksheet in which the balances of all ledgers are compiled into debit and credit account column totals that are equal.

Perpetual Inventory System

A systematic approach to maintaining accurate inventory records that adjust in real-time with each purchase or sale of inventory items.

Freight-In

The cost of transporting goods into a business, treated as part of the cost of inventory in the calculation of the cost of goods sold.

Discounts

Reductions to the selling price of goods or services, often used as a sales strategy to encourage purchases.