Asked by Jessica Lapnow on Apr 25, 2024
Verified
Hedging is a way to:
A) ensure lowest price.
B) try to minimize price and currency exchange risks.
C) minimize collusive bidding.
D) set trade discounts.
E) evaluate quantity discounts.
Hedging
A financial strategy used to reduce or limit the risk of price movements in commodities, currencies, or securities, by taking an offsetting position in a related security.
Currency Exchange
The process of exchanging one country's currency for another, affecting international trade and investments due to fluctuating exchange rates.
Price Risks
The uncertainty and potential financial loss associated with changes in the price of goods, services, or commodities.
- Comprehend the application of hedging to mitigate risks associated with price fluctuations and foreign exchange.
Verified Answer
RS
ramesh sharma8 days ago
Final Answer :
B
Explanation :
Hedging is a risk management strategy used to minimize price and currency exchange risks. By taking a position in the market that offsets potential losses in another position, hedging can minimize the impact of market fluctuations on a company's bottom line. It is commonly used in international trade to protect against fluctuations in foreign currency exchange rates.
Learning Objectives
- Comprehend the application of hedging to mitigate risks associated with price fluctuations and foreign exchange.