Answer (D) is correct . A natural hedge is a method of reducing risk by investing in two different items whose performance tends to cancel each other. A natural hedge does not involve the use of sophisticated financial tools such as derivatives or futures contracts. A wheat farmer who sells a wheat futures contract is using hedging (a short hedge) to protect against future price declines. It is not an example of a natural hedge.
Answer (A) is incorrect because This is an example of a natural hedge.
Answer (B) is incorrect because This is an example of a natural hedge.
Answer (C) is incorrect because This is an example of a natural hedge.
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