Suppose You Are a Manager for a Company That Produces

question 117

Multiple Choice

Suppose you are a manager for a company that produces grape jelly.Which of the following is the best way for you to reduce your risk?

• A) acquire a derivative that increases in value if grape prices increase
• B) acquire a derivative that increases in value if grape jelly prices increase
• C) sell a derivative that increases in value if grape prices increase
• D) sell a derivative that increases in value if grape jelly prices increase

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Definitions:

Debt Investments

Investments made by purchasing debt instruments, such as bonds, where the investor becomes a creditor to the issuer.

Journal Entries

Recorded transactions in the accounting journal that show the financial activities of a company.

Marketable

Describes assets or securities that can easily be sold or converted into cash without a significant loss in value.

Cash Dividend

A payout from the company's profits, determined by the board of directors, given to certain shareholders as cash.