A Farmer Hedged His Risk by Buying Put Options on Wheat

question 96

Multiple Choice

A farmer hedged his risk by buying put options on wheat with an exercise price of $2.70 at a price of $0.14 per bushel.If the price of wheat at the expiration of the contract is $2.70, what is the net revenue from each bushel of wheat?

• A)$2.56
• B)$2.63
• C)$2.70
• D)$2.84 Revenue from one bushel of wheat = $2.70

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