A Farmer Sells Futures Contracts at a Price of $2

question 57

Multiple Choice

A farmer sells futures contracts at a price of $2.75 per bushel. The spot price of corn is $2.55 at contract expiration. The farmer harvested 12,500 bushels of corn and sold futures contracts on 10,000 bushels of corn.
-Ignoring the transaction costs,how much did the farmer improve his cash flow by hedging sales with the futures contracts?

• A) $0
• B) $2,000
• C) $31,875
• D) $33,875

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Definitions:

1820s And 1830s

Decades during the early 19th century notable for significant social, political, and economic changes in the United States, including westward expansion and the rise of democratic sentiment.

Democracy

A system of government where the citizens exercise power by voting.

Age Of Jackson

A period in American history characterized by the presidency of Andrew Jackson (1829–1837), marked by the expansion of democracy and the “common man,” and significant political and social developments.