A Hedger Buys a Futures Contract That Obligates the Owner

question 47

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

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Definitions:

Virtual Reality

A computer-generated simulation of a three-dimensional environment that can be interacted with in a seemingly real way by a person using special electronic equipment.

Computer Graphics

The use of computers to create, process, and manipulate visual content and imagery.

Real-world Situations

Scenarios or circumstances that occur in everyday life outside of controlled or artificial environments.

Systematic Desensitization

A behavioral therapy technique used to reduce phobias and anxiety through gradual exposure to the feared object or situation while practicing relaxation techniques.