A Company Will Buy 1000 Units of a Certain Commodity

question 18

Multiple Choice

A company will buy 1000 units of a certain commodity in one year.It decides to hedge 80% of its exposure using futures contracts.The spot price and the futures price are currently $100 and $90,respectively.The spot price and the futures price in one year turn out to be $112 and $110,respectively.What is the average price paid for the commodity?

• A) $92
• B) $96
• C) $102
• D) $106

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Definitions:

Social Security

A federal government program in the United States that provides retirement, disability, and survivors' benefits to eligible individuals.

Contributory Program

A social program financed through the contributions of its participants, often via taxes or premiums, providing benefits based on those contributions.

Social Security

A government program that provides financial assistance to people who are retired, disabled, or otherwise eligible for benefits based on their earnings records.

Income Percentage

The proportion of a person's or entity's income relative to a specific benchmark or total income, often used in financial analysis and planning.