A Farmer Hedged His Risk by Buying Put Options on Wheat

question 84

Multiple Choice

A farmer hedged his risk by buying put options on wheat with an exercise price of $2.70 at a price of $0.14 per bushel.If the price of wheat at the expiration of the contract is $2.70,what is the net revenue from each bushel of wheat?

• A) $2.56
• B) $2.63
• C) $2.70
• D) $2.84

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Definitions:

World's Output

The total production of goods and services by all countries and economies worldwide over a specified period of time.

Poorest 20 Percent

The segment of the population with the lowest income, representing the bottom quintile in the distribution of income or wealth.

World Income

The total income generated by individuals and entities across the globe.

Per Capita Income

The average income earned per person in a given area in a specified year.