You Are the Purchasing Agent for a Major Cookie Company

question 69

Multiple Choice

You are the purchasing agent for a major cookie company. You anticipate that your firm will need 20,000 bushels of oats in December. You decide to hedge your position today and did so at the closing price of the day. Assume that the actual market price turns out to be 228.0 on the day you actually buy the oats. How much did you gain or lose by hedging your position?
Oats - 5,000 bu.:
Cents per bu.

• A)lost $4,000
• B)lost $400
• C)saved $40
• D)saved $400
• E)saved $4,000

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Definitions:

Bankruptcy

A legal proceeding involving a person or business that is unable to repay their outstanding debts, allowing them to negotiate for partial or complete relief from these debts.

Apparent Authority

A principle in law where a person appears to have authority to act on behalf of another party, such as a company, due to their conduct or statements.

Disclosed Principal

A principal whose identity is known by the third party at the time of entering into a contract with an agent.

Terminates

The act of bringing something to an end or conclusion, often referring to the cessation of agreements, employment, or processes.