The Hedge Created by a Commodity Swap Does Not Protect

question 4

Multiple Choice

The hedge created by a commodity swap does not protect the hedger against what type of risk?

• A) Commodity price ris
• B) Reinvestment risk
• C) Inflation risk
• D) Interest rate risk

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Definitions:

Reasonable Person

A hypothetical individual who exercises average care, skill, and judgment in conduct and who serves as a comparative standard for determining liability.

Implied Warranty

A legal term referring to guarantees that are not explicitly stated but are assumed in a sale, ensuring that a product is fit for its intended purpose.

Merchantability

A warranty that a product will meet reasonable expectations of quality and fitness for use as sold.

Frame Breaks

can refer to interruptions or disconnections in the structural continuity of a building, vehicle, or other objects, often requiring repair or restructuring.