A Hedger Buys a Futures Contract That Obligates the Owner

question 44

Multiple Choice

A hedger buys a futures contract that obligates the owner to take delivery of 5,000 bushels of wheat at a price of $3.30 per bushel.At expiration the spot price of wheat is $3.80 per bushel.The hedger has:

• A)saved 50¢ per bushel through hedging.
• B)gained peace of mind at a price of 50¢ per bushel.
• C)the opportunity to avoid taking delivery, since price declined.
• D)locked in an effective price of $3.05 per bushel.

Understand the concept and significance of social capital in personal and professional contexts.

Distinguish between different types of social capital: bonds, bridges, and linkages.

Identify the dimensions of social capital and their implications on networking.

Recognize the advantages and utility of diverse skill sets within networks.

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Definitions:

Exercise Price

The specified price at which the option holder can buy (in case of a call option) or sell (in case of a put option) the underlying asset.

Stock Option Plans

Programs that grant employees the option to purchase a company's stock at a predetermined price, often used as a form of compensation.

Market Price

The current price at which an asset or service can be bought or sold in a marketplace.

Treasury Shares

Stock that has been bought back by the issuing company, reducing the amount of outstanding stock on the open market.