Biscuits, Inc. (i.e, a pastry and baking products company) uses 200,000 bushels of wheat each year...

 

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Biscuits, Inc. (i.e, a pastry and baking products company) uses 200,000 bushels of wheat each year to assure steady supply of wheat and to provide customers with consistent product line and stable prices, Biscuits agrees upon a contract with its supplier in January for wheat, July delivery. How can Biscuits, Inc hedge the risk of a wheat price increment? Biscuits, Inc. (i.e, a pastry and baking products company) uses 200,000 bushels of wheat each year to assure steady supply of wheat and to provide customers with consistent product line and stable prices, Biscuits agrees upon a contract with its supplier in January for wheat, July delivery. How can Biscuits, Inc hedge the risk of a wheat price increment?

Answer rating: 100% (QA)

Biscuit Inc can hedge the risk of a wheat price increment by using financial instruments such as futures contracts or put options Futures contracts ar... View the full answer