IIA Exam IIA-CFSA Topic 3 Question 70 Discussion

Actual exam question for IIA's IIA-CFSA exam

Question #: 70
Topic #: 3

End users need to hedge the prices at which they can purchase these commodities for instance:

AA University might want to lock in the price at which it purchases electricity to supply its air conditioning units for upcoming summer months

BAn airline wants to lock in the price of the jet fuel it needs to purchase in order to satisfy the peak in seasonal demand for travel

CA cotton producer wants to hedge his exposure to changes in the price of fertilizers or his end product (cotton)

DOnly A and B

Show Suggested Answer

Suggested Answer: D

by Cassandra at Jan 24, 2025, 03:19 PM

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Gregg

2 days ago

I'm going with C. Universities, airlines, and commodity producers all use hedging to manage their exposure to price fluctuations.

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Tequila

3 days ago

Haha, the cotton producer one is a classic. Gotta love those farmers trying to hedge their fertilizer costs!

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Oretha

10 days ago

D seems like the obvious choice to me. Hedging is typically used by end-users to lock in prices for their key inputs, like a university for electricity and an airline for jet fuel.

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Katlyn

14 days ago

I think the correct answer is C. Hedging is used to manage price risk for a variety of commodities, not just electricity and jet fuel.

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Ming

7 days ago

I think the correct answer is C. Hedging is used to manage price risk for a variety of commodities, not just electricity and jet fuel.

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Raina

16 days ago

I believe option D is correct because both A and B involve hedging price risks.

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Callie

20 days ago

I agree, it's important for businesses to protect themselves from price fluctuations.

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Anabel

27 days ago

I think end users should hedge their prices to manage risk.

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