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:

Identification

A psychological process whereby the subject assimilates an aspect, property, or attribute of the other and is transformed, wholly or partially, by the model the other provides.

European Sports Car

Refers to high-performance and often luxury vehicles designed and manufactured in Europe, known for their speed, handling, and elegance.

Defence Mechanism

A defence mechanism is a psychological strategy unconsciously used to protect a person from anxiety arising from unacceptable thoughts or feelings.

Repression

A defense mechanism where distressing thoughts, memories, or urges are excluded from conscious awareness.