On March 1 the Price of a Commodity Is $1,000

question 19

Multiple Choice

On March 1 the price of a commodity is $1,000 and the December futures price is $1,015.On November 1 the price is $980 and the December futures price is $981.A producer of the commodity entered into a December futures contracts on March 1 to hedge the sale of the commodity on November 1.It closed out its position on November 1.What is the effective price (after taking account of hedging) received by the company for the commodity?

• A) $1,016
• B) $1,001
• C) $981
• D) $1,014

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Definitions:

Pain Of Losing

The emotional or psychological distress experienced after suffering a loss, often more intense than the joy of equivalent gains.

Firm-Specific Risk

Firm-specific risk refers to the risk associated with events or factors that are unique to a particular company, which can affect its stock price.

Market Risk

The risk of losses in financial markets arising from movements in market prices.

Stocks

Financial securities representing partial ownership in a company, allowing investors to claim on the company's assets and earnings.