The solution suggested by Fareeda was indeed a successful one. They did apply for this fund type and they got selected, received the fund and immediately put it into good use, they have also received a lot of guidance and were able to overcome many obstacles, throughout the past four years since they have received this last fund. They are now considered an established firm. Throughout these years one of the obstacles they faced was a time when they had very high expectations that the price of the dollar would increase. This would have a big impact on their business as some of their products and their machines are from the USA, thus would mean that they would have to increase their prices a lot and that would affect the demand on their product. They gathered for an emergency meeting to try and find a way to hedge this huge risk of increase in dollar price. What solution are you looking for? Asked Malak sarcastically, How can you avoid an increase in the dollar? An increase in its price is applicable to everyone. There are no solutions this time my friends. Ofcourse there is, replied Ahmad and Fareeda, We studied it in university in more than one course, there is a way to hedge the increase in prices when you are buying anything.

QUESTION 7) What are Ahmad and Fareeda talking about, what financial instrument is used to hedge the risk of prices increasing and how?

QUESTION 8) Are there different instruments they can use? If yes, what are they and explain the difference between them (5 marks)