A Hedger Buys a Futures Contract That Obligates the Owner

question 64

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 $6.80 per bushel. At expiration the spot price of wheat is $6.68 per bushel. The hedger has:

• A) saved $0.12 per bushel through hedging.
• B) gained peace of mind at a price of $0.12 per bushel.
• C) the opportunity to avoid taking delivery since the price declined.
• D)locked in an effective price of $6.68 per bushel.

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