Question
Suppose that you own a farm in the U.S. and want to protect your futures sales in the U.S. against the risk of falling agricultural
Suppose that you own a farm in the U.S. and want to protect your futures sales in the U.S. against the risk of falling agricultural prices. How could you hedge your risk?
A. Sell your farm now before you go broke.
B. Enter a long position in a futures contract on gold to protect yourself against future inflation.
C. Take a long position in a futures contract on the agricultural product that you are planning to sell in the future.
D. Enter a short position in a forward contract on a foreign currency to protect against currency price fluctuations.
E. Take short position in a futures contract on the agricultural product that you are planning to sell in the future.
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