You Are the Buyer for a Cereal Company and You

question 14

Multiple Choice

You are the buyer for a cereal company and you must buy 80,000 bushels of corn next month. The futures contracts on corn are based on 5,000 bushels and are currently quoted at 415'0 cents per bushel for delivery next month. If you want to hedge your cost, you should _____ contracts at a cost of _____ per contract.

• A)buy 12; $2,075
• B)buy 16; $20,750
• C)buy 16; $2,075,000
• D)sell 12; $2,075
• E)sell 16; $2,075,000

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Definitions:

Government Procurement Contract

An agreement between the government and a private company for the provision of goods and services to the government.

Adequate Funding

Sufficient financial resources allocated to support a project, initiative, or organization.

Shopping Portal

An online platform that aggregates a wide variety of products from different suppliers, allowing consumers to compare and purchase items in one place.

Favorable Tax Treatment

Tax policies or regulations that provide benefits or reductions in tax liabilities for certain activities or investments.