A Firm Wants to Hedge a Potential Transaction but Is

question 34

Multiple Choice

A firm wants to hedge a potential transaction but is also concerned about a possibility that it may not take place. In this case it is better to hedge potential risks using ________.

• A) options
• B) forwards
• C) futures
• D) none of the above

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Definitions:

Esophageal Phase

A phase of swallowing during which the bolus moves from the esophagus into the stomach, involving coordinated muscular contractions.

Voluntary Phase

The initial stage of swallowing controlled consciously, where food is pushed by the tongue into the throat.

Peristalsis

Wave-like muscle movements that transport food through the digestive tract.

Pyloric Sphincter

The ring of muscle that regulates the passage of food from the stomach to the duodenum of the small intestine.