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:

Liberty

Living without the influence of restricting authority over one’s personal life choices, behaviors, or political ideologies within the social order.

Colonies

Territories under the political control of an outside power, often settled by people from that power and exploited for economic benefit.

Navigation Acts

A series of British laws that regulated colonial trade and enabled England to collect taxes from its colonies by controlling goods shipped to and from the colonies.

British Regulating Trade

The set of policies and laws implemented by Britain to control trade within its empire, including the colonies.