Chartered Investment Manager (CIM) Practice Exam · Question
A Canadian agricultural company is concerned about a potential decrease in the price of its wheat crop before harvest. To mitigate this risk, the company could enter into which of the following futures contracts?
To hedge against a potential price decrease, the company would sell wheat futures, locking in a price for its future crop. If prices fall, the profit from the f
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Question: A Canadian agricultural company is concerned about a potential decrease in the price of its wheat crop before harvest. To mitigate this risk, the company could enter into which of the following futures contracts?
Answer options:
- Buy wheat futures contracts. ✅ Sell wheat futures contracts.
- Buy crude oil futures contracts.
- Sell Canadian dollar futures contracts.
Correct answer: Sell wheat futures contracts.
Explanation: To hedge against a potential price decrease, the company would sell wheat futures, locking in a price for its future crop. If prices fall, the profit from the futures contract offsets the loss on the physical crop.
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