A Firm Enters into a One-Year Forward Contract to Buy

question 4

Multiple Choice

A firm enters into a one-year forward contract to buy refined oil.To hedge itself,the firm simultaneously sells one-year futures contracts on crude oil.In which of the following scenarios might the firm come under cash flows pressure related to these contracts?

• A)Oil prices plummet a day before the maturity of the contracts
• B)Oil prices skyrocket a day before the maturity of the contracts
• C)Oil prices plummet a day after the firm enters the contracts
• D)Oil prices skyrocket a day after the firm enters the contracts

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Definitions:

Digital Rectal Exam

A physical examination method where a healthcare provider inserts a gloved, lubricated finger into the rectum to check for abnormalities.

Biopsy-Proven

Confirmation of a disease or condition by examining a tissue sample removed from a patient's body.

Sensitivity

The ability of a test to correctly identify those with the disease (true positive rate), indicating its reliability in detecting cases.

Infectious Disease

Diseases caused by pathogenic microorganisms, such as bacteria, viruses, parasites, or fungi; can be spread directly or indirectly from one person to another.