Manufacturers Who Are Concerned About Volatile Commodity Prices Often Use

question 7

Multiple Choice

Manufacturers who are concerned about volatile commodity prices often use option contracts to alter their risks.What is the worst-case scenario for a seller of put options on corn with a strike price of $2.25 per bushel?

• A) If corn prices drop below $2.25 the option premium will be lost.
• B) If corn prices rise above $2.25 the option premium will be lost.
• C) Losses can be unlimited if prices drop sufficiently.
• D) Losses can be unlimited if prices rise sufficiently.

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Definitions:

Erosionally Resistant Cliffs

Cliffs that demonstrate a high resistance to weathering and erosion, often due to their geological composition, maintaining steep faces over time.

Vegetation Covering

The layer of plants and plant material that covers the ground in an area, including grasses, trees, shrubs, and underbrush.

Slope-Forming

the process by which the shape of landforms is influenced by various factors like erosion and deposition, leading to slopes.

False Quality Report

A misleading document or assessment that inaccurately represents the quality of a product or service.