Corn Call Options with a $1

question 4

Multiple Choice

Corn call options with a $1.75 strike price are trading for a $0.14 premium.Farmer Jayne decides to hedge her 20,000 bushels of corn by selling short call options.Six-month interest rates are 4.0% and she plans to close her position in 6 months.What is the total premium she will earn on her short position?

• A) $2,800
• B) $2,912
• C) $800
• D) $1,600

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