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Coles, one of the two giant supermarkets in Australia, sells in-house baked bread, cakes and pastry. Thus, it needs to purchase a reasonable amount of
Coles, one of the two giant supermarkets in Australia, sells in-house baked bread, cakes and pastry. Thus, it needs to purchase a reasonable amount of wheat every month. Amid recent rising wheat prices, Coles is looking for a way to protect itself from price risk, and currently considering to buy wheat in advance using either a forward contract or a call option. Which of the two would you recommend to Coles?
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