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Oz Juice signed a contract with an overseas supplier for future purchases of pineapples at a set exchange rate for SUS - HSC - SSCE Business Studies - Question 14 - 2008 - Paper 1
Question 14
Oz Juice signed a contract with an overseas supplier for future purchases of pineapples at a set exchange rate for SUS. Which term best describes this financial str... show full transcript
Worked Solution & Example Answer:Oz Juice signed a contract with an overseas supplier for future purchases of pineapples at a set exchange rate for SUS - HSC - SSCE Business Studies - Question 14 - 2008 - Paper 1
Step 1
Which term best describes this financial strategy?
Answer
The strategy employed by Oz Juice involves entering into a contract for future purchases at a predetermined exchange rate, effectively allowing them to manage potential fluctuations in currency rates. This approach is commonly referred to as Hedging. Hedging is utilized to mitigate the risks associated with adverse movements in exchange rates, making it the most appropriate choice among the options provided.