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.

---

Definitions:

Doorbell

A device designed to produce a sound, or a bell signal when pressed, used as an alert mechanism for the presence of visitors.

Optimal Interstimulus Intervals

The ideal time gap between consecutive stimuli that maximizes learning or the effectiveness of a response.

Reflex System

A biological system that enables organisms to respond automatically to specific stimuli without conscious thought.