Commodity Exchanges Enable Producers and Consumer to Hedge Their -----------Given

question 38

Multiple Choice

Commodity exchanges enable producers and consumer to hedge their -----------given the uncertainty of the future.

• A)seasonal risk
• B)profit risk
• C)production risk
• D)price risk

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Definitions:

Diversified Risk

Diversified risk refers to the reduction of risk in an investment portfolio by allocating investments among various financial instruments, industries, or other categories.

Systematic Risk

This is the exposure to uncertainty faced by all investments in a market or a sector, and is also recognized as market risk or non-diversifiable risk.

Unsystematic Risk

The risk of price change due to the unique circumstances of a specific security, as opposed to the market as a whole.

Market Risk Premium

The extra return expected by investors for taking on the risk of investing in the stock market over a risk-free rate.