A Company Will Buy 1000 Units of a Certain Commodity

question 10

Multiple Choice

A company will buy 1000 units of a certain commodity in one year.It decides to hedge 80% of its exposure using futures contracts.The spot price and the futures price are currently $100 and $90,respectively.If the spot price and the futures price in one year turn out to be $112 and $110,respectively.What is the average price paid for the commodity?

• A)$92
• B)$96
• C)$102
• D)$106

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Definitions:

Social Learning Theory

A theory that posits individuals learn behaviors by observing and imitating others, influenced by punishments and rewards.

Fixed Interval

A schedule of reinforcement where the first response is rewarded only after a specified amount of time has elapsed.

Reinforcement Schedule

In operant conditioning, the rule that describes how often and under what conditions a behavior is reinforced.

Vicarious Punishment

Learning process in which an individual observes another being punished and thus learns to inhibit the behavior that led to the punishment.