A 6-Month Forward Contract for Corn Exists with a Price

question 17

Multiple Choice

A 6-month forward contract for corn exists with a price of $1.70 per bushel.If Farmer Jayne decides to hedge her 20,000 bushels of corn with the forward contract,what is her profit or loss if spot prices are $1.65 or $1.80 when she sells her crop in 6 months? Her total costs are $33,000.

• A) $1,000 gain or $1,000 loss
• B) $0 gain or $3,000 gain
• C) $0 loss or $3,000 loss
• D) $1,000 gain or $1,000 gain

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Definitions:

Sleepwalking

A disorder occurring during deep sleep in which an individual performs activities they are normally capable of only while awake, with limited consciousness and recollection.

Sleeptalking

The act of speaking during sleep without being aware of it, a phenomenon that can occur in any stage of the sleep cycle.

Narcolepsy

A chronic sleep disorder characterized by overwhelming daytime drowsiness and sudden attacks of sleep, often accompanied by loss of muscle tone triggered by strong emotions (cataplexy).

Night Terrors

Intense episodes of fear that occur during sleep, often resulting in screaming, thrashing, and a high level of distress, typically not remembered upon awakening.