IIA Exam IIA-CFSA Topic 7 Question 58 Discussion

Actual exam question for IIA's IIA-CFSA exam

Question #: 58
Topic #: 7

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 Elliot at Aug 08, 2024, 05:58 AM

Limited Time Offer

25%

Off

Get Premium IIA-CFSA Questions as Interactive Web-Based Practice Test or PDF

Contribute your Thoughts:

Submit Cancel

Shala

3 months ago

Yes, locking in prices for essential commodities like electricity and jet fuel can help businesses budget effectively.

upvoted 0 times

...

Latricia

3 months ago

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

upvoted 0 times

...

Doug

3 months ago

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

upvoted 0 times

...

Stevie

3 months ago

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

upvoted 0 times

...

Micah

3 months ago

Yes, locking in prices for essential commodities like electricity and jet fuel can help businesses budget effectively.

upvoted 0 times

...

Elenore

3 months ago

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

upvoted 0 times

...

Trevor

3 months ago

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

upvoted 0 times

...

Denise

4 months ago

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

upvoted 0 times

...

Wenona

4 months ago

Ha! Reminds me of the time I tried to hedge my bets on a horse race. Ended up losing my shirt. But in all seriousness, I think C is the way to go here.

upvoted 0 times

...

Arthur

4 months ago

I agree with Pearline. C covers all the bases - universities, airlines, and producers all need to hedge their exposure to commodity price fluctuations.

upvoted 0 times

...

Hmm, I'm not sure about that. I was leaning towards D, since the question specifically asks for 'these commodities', and the first two options seem more directly related to commodities like electricity and jet fuel.

upvoted 0 times

Avery

3 months ago

Yeah, I agree. A and B are the only options related to commodities like electricity and jet fuel.

upvoted 0 times

...

Pamela

3 months ago

I think you're right, D does seem to be the best choice here.

upvoted 0 times

...

Pearline

4 months ago

I think the correct answer is C. Hedging applies to all the scenarios mentioned - a university locking in electricity prices, an airline locking in jet fuel prices, and a cotton producer hedging against changes in fertilizer or cotton prices.

upvoted 0 times

Refugia

3 months ago

Oh, I see. Thanks for clarifying that. It makes sense now why the correct answer is D. Hedging is more about locking in prices for future purchases to manage risk.

upvoted 0 times

...

Justine

3 months ago

Actually, the correct answer is D. Only A and B are examples of hedging. The cotton producer scenario involves managing exposure to price changes, but it's not a form of hedging.

upvoted 0 times

...

Glynda

4 months ago

upvoted 0 times

...

IIA Exam IIA-CFSA Topic 7 Question 58 Discussion

Contribute your Thoughts:

Shala

Latricia

Doug

Stevie

Micah

Elenore

Trevor

Denise

Wenona

Arthur

Oretha

Avery

Pamela

Pearline

Refugia

Justine

Glynda