A Silver Mining Company Has Used Futures Markets to Hedge

question 8

Multiple Choice

A silver mining company has used futures markets to hedge the price it will receive for everything it will produce over the next 5 years.Which of the following is true?

• A) It is liable to experience liquidity problems if the price of silver falls dramatically
• B) It is liable to experience liquidity problems if the price of silver rises dramatically
• C) It is liable to experience liquidity problems if the price of silver rises dramatically or falls dramatically
• D) The operation of futures markets protects it from liquidity problems

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