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