The Seller of a Pork Bellies Futures Contract at $1

question 27

Multiple Choice

The seller of a pork bellies futures contract at $1.41 per pound noted that the closing price of pork bellies was $1.44 today.What will happen to this contract,which requires delivery of 40,000 pounds of pork bellies at expiration?

• A) A loss of $400 is posted to the account.
• B) A gain of $400 is posted to the account.
• C) A loss of $1,200 is posted to the account.
• D) A gain of $1,200 is posted to the account.

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Definitions:

Law of Demand

A fundamental economic principle stating that, all else being equal, as the price of a good increases, consumer demand for the good decreases, and vice versa.

Average Price

The mean price of a good or service, calculated by dividing the total revenue by the quantity sold.

Equilibrium Price

The cost at which the amount of a product consumers want to buy matches the amount producers are willing to sell, leading to equilibrium in the market.

Gigabyte

A unit of digital information storage equivalent to approximately 1 billion bytes (1,000 megabytes).