You Are the Purchasing Agent for a Food Producer

question 216

Multiple Choice

You are the purchasing agent for a food producer. You anticipate that your firm will need 160,000 bushels of oats in March. You decide to hedge your position today and did so at the closing price of the day. Assume that the actual market price turns out to be 174.6 on the day you actually buy the oats. By buying the contract you:

Oats - 5,000 bu.; cents per bu.

• A) Saved $1,080.
• B) Saved $3,040.
• C) Saved $4,800.
• D) Spent an additional $1,080.
• E) Spent an additional $3,040.

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