When a firm hedges a risk, it
A)eliminates the risk.
B)transfers the risk to someone else.
C)makes the government assume the risk.
D)increases the risk.

Question

Quizplus · Accepted Answer

When a firm hedges a risk, it transfers the risk to someone else, such as an insurance company or another entity willing to take on the risk in exchange for compensation. The firm still retains the risk, but it is offset by the insurance or hedging arrangement.

When a Firm Hedges a Risk, It