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Avoiding losses through hedging or insuring

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Note whether the following are ways to avoid losses through hedging or insuring:
- Lock in a $979.00 fare home for the holidays.
- Purchase a put option on a stock you do own.
- Agree to purchase a house in one year for a fixed price of $200,000.
- Lease a car with an option to purchase it in three years.
- Enter into a swap contract to exchange fixed interest payments for floating-rate payments because you have floating-rate assets.
- As a wheat grower, enter into a forward contract to sell you wheat in two months at a fixed price set today.
- Pay a premium for catastrophic health care coverage.
- Pay for a credit guarantee on a loan you are worried about collecting.

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334 words explain what will help avoid these issues and what will exacerbate them.

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12. The fundamental difference between insuring and hedging is as follows: When you hedge, you eliminate the risk of loss by giving up the potential for gain. When you insure, you pay a premium to eliminate the risk of loss and retain the potential for gain.

- Lock in a $979.00 fare home for the holidays. -- hedging (you don't have the potential anymore for buying a ticket at the lower price, but you can't really lose any money.)

- Purchase a put option on a ...

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