A Soybean Farmer Plants His Crop Today but He Doesn't

question 236

Multiple Choice

A soybean farmer plants his crop today but he doesn't harvest it until next year when the soybean price could be quite different from today's spot price. To avoid the price risk, the farmer can:

• A) sell in the futures market.
• B) buy in the futures market.
• C) sell in the spot market.
• D) buy in the spot market.

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Definitions:

Capital Contribution

It is the amount of money or assets that an investor puts into a company in exchange for part ownership or a stake in the company.

Manages Business

The process of organizing, planning, directing, and controlling the resources and operations of a business to achieve its goals and objectives.

Partnership Agreement

A partnership agreement is a legal document that outlines the rights, responsibilities, and obligations of each partner in a business partnership.

Automatic Termination

A provision within a contract that automatically ends the contract under certain predefined conditions without the need for a notice.