You Are a Baker and Need to Purchase a Substantial

question 66

Multiple Choice

You are a baker and need to purchase a substantial amount of wheat flour three months from now in preparation for your busy season. Your concern is that the price of wheat will increase substantially before you make your purchase. Which one of the following positions in wheat would be an effective hedge for you?

• A)long position in spot market
• B)short position in spot market
• C)long position in futures market
• D)short position in futures market
• E)none of these

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Definitions:

Proactive Interference

A phenomenon where old information prevents the recall of newly learned information.

Retroactive Interference

A situation where the creation of new memories hinders the ability to recall older memories.

Nonsense Syllables

A string of letters that does not correspond to a word in any language, used in psychological experiments on memory and learning.

Proactive Interference

A phenomenon where old information stored in memory interferes with the ability to learn and remember new information.