A farmer sells wheat futures. Which risk does the farmer reduce?
AWheat price falling below contract price
BDefault by the clearing house
CFall in the miller's flour demand
DWheat price rising above contract price
Answer & Solution
Correct answer: A. Wheat price falling below contract price
Locking in a price removes the farmer's exposure to the market price dropping under the contract price.
Keep practising Ind AS 109 Financial Instruments
Browse all Ind AS 109 Financial Instruments questions for CA Final, or explore more Financialreporting topics.
Related questions
The 2009 IFRS 9 model for debt assets allowed which two approaches?IFRS 9 hedge documentation must describe what?How did IFRS 9 change hedge accounting for non-financial entities?What must an entity do to qualify for hedge accounting?Which exchange is noted for rice futures traded since the eighteenth century?As an option nears expiry, what happens to its time value?Which portion of IFRS 9 did the IASB issue first, in 2009?Under the FASB CECL model, losses are recognised over what period from acquisition?