A Hedger Buys a Futures Contract That Obligates the Owner

question 81

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 $2.80 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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