A hedge between which two of the following firms is most apt to reduce each firm's financial risk exposure?
A) Wheat farmer and bakery
B) Oil producer and coal miner
C) Wheat grower and pharmaceutical firm
D) Pastry bakery and cotton farmer
E) Shoe manufacturer and coat manufacturer

Question

Quizplus · Accepted Answer

A hedge between a wheat farmer and bakery can reduce the financial risk exposure for both as the wheat farmer can sell their crop in advance to the bakery, allowing them to lock in a price and protect against price fluctuations. The bakery, in turn, can secure a steady supply of wheat for their products. This reduces the financial risk exposure for both parties.

A Hedge Between Which Two of the Following Firms Is