A Baker of Bread Has a Long-Term Fixed-Price Contract to Supply

question 120

Multiple Choice

A baker of bread has a long-term fixed-price contract to supply bread. Which of the following would NOT reduce her risk?

• A) Taking the long position in wheat futures contract
• B) Hedging this risk in the wheat futures market
• C) Finding a wheat farmer who will take the short position in a wheat futures contract
• D) Finding a wheat farmer who will take the long position in a wheat futures contract

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Definitions:

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