Four investors enter into long sugar contracts.Three are speculators and one is hedging.Which of the following is hedging?
A)Farmer
B)Cereal company
C)Mutual fund
D)None of these answers

Question

Quizplus · Accepted Answer

The cereal company is most likely hedging against rising sugar prices as they need sugar as a key ingredient in their production process. The farmer could be hedging if they produce sugar and are selling it at a fixed price, but it is not explicitly stated in the question. The mutual fund and the three speculators are all considered to be speculating, as they are entering into contracts for potential profit rather than hedging against potential losses.

Four Investors Enter into Long Sugar Contracts