An agreement with a supplier fixing terms for years ahead is a hedge using a contract that is:
ALong-handled
BLong-standing
CLong-term
DLong-listed
Answer & Solution
Correct answer: C. Long-term
1. The exposure is to volatile input prices.
2. Locking terms in advance removes that volatility.
3. So the firm uses a long-term contract.
_Source: OpenStax Principles of Finance 2e, Chapter 20, Risk Management and the Financial Manager._
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