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:

Semantic Codes

In psychology and cognitive science, it refers to the process of encoding information into memory, focusing on the meaning of the information.

Structural Encoding

Structural encoding is the process of encoding information according to the structure of objects, focusing on the physical features rather than the meaning.

Phonemic Encoding

The process by which sounds are translated into mental symbols for storage in memory.

Semantic Encoding

The process of encoding sensory information into memory, attaching meaning and significance to it.