Farmer Jones raises several hundred acres of corn and would suffer a significant loss should the price of corn decline at harvest time. Which one of the following would he be doing if he purchased financial securities to offset this price risk?
A) Insuring
B) Deriving
C) Hedging
D) Forwarding
E) Manipulating

Question

Quizplus · Accepted Answer

Hedging refers to the act of purchasing financial securities to offset potential losses from an adverse price movement. In this scenario, Farmer Jones is hedging against a potential decline in the price of corn at harvest time by purchasing financial securities.

Farmer Jones Raises Several Hundred Acres of Corn and Would