A hedger who buys a futures contract is betting that prices will _____ at the expiration of the contract.
A)Decrease
B)Increase
C)Remain constant
D)Guarantee high profits

Question

Quizplus · Accepted Answer

Hedgers who buy futures contracts are attempting to protect themselves against a potential price increase in the underlying asset. By purchasing the futures contract, they are guaranteed the opportunity to buy the asset at the current price, even if prices increase in the future. This protects them from potential losses due to rising prices.

A Hedger Who Buys a Futures Contract Is Betting That