How can a gold futures contract be used as a hedge against a potentially dramatic decrease in the price of the gold needed as an input into the production of computer microprocessors?
A) The computer company should sell gold futures contracts.
B) The computer company should sell more gold futures contracts than it should buy.
C) This is a standard business situation, which would be favourable if it were to happen, so no hedge is needed.
D) The computer company should lower its finished product prices now in anticipation of the decrease in the price of gold inputs.
Correct Answer:
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