The Purpose of a Hedging Strategy Is to

question 106

Multiple Choice

The purpose of a hedging strategy is to

• A) avoid speculation on future prices.
• B) speculate that future prices will be lower than the spot price.
• C) speculate that future prices will be higher than the spot price.
• D) avoid exposure to commodity rate risk.

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Definitions:

Leasing

A contractual agreement where one party, the lessor, allows another party, the lessee, to use an asset for a specified period in exchange for periodic payments.

Temporary Basis

A condition or status applied for a limited time period, often used in finance to describe temporary adjustments or measures.

Assets

Resources owned or controlled by a business or an individual that are expected to produce economic value or benefit in the future.

Leasing

Leasing is a financial agreement in which one party, the lessor, allows another party, the lessee, to use an asset for a specified period in exchange for periodic payments.