Hedging a domestic company's budgeted import purchases to the extent of orders placed could be hedges of firm commitments.

Question

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Hedging a domestic company's budgeted import purchases to the extent of orders placed is considered hedging of firm commitments because the company has committed to specific transactions that expose it to financial risk, such as currency fluctuations, which the hedge aims to mitigate.

Hedging a Domestic Company's Budgeted Import Purchases to the Extent