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What are the greatest risk you confront

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Question - You are a small oil trading firm with limited financial reserves, and have an agreement to sell 1,000,000 barrels oil to a company in Indonesia in six months at a fixed price in Indonesian Rupiah, and you already have a purchase contract for the oil with a US supplier to meet that obligation (the contract is in dollars).  What kind of contracts will you use: Rupiah futures, Oil futures, or both?  And what are the greatest risk(s) you confront, once you are using futures contracts to hedge this transaction?

a. Oil futures; Oil prices increase

b. Rupiah futures; Rupiah appreciates

c. Oil futures; Oil prices decrease

d. Rupiah futures; Rupiah depreciates

e. None of these answers.

Reference no: EM132790417

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