A Manufacturer of Breakfast Cereal Is Concerned About Corn Prices

question 38

Multiple Choice

A manufacturer of breakfast cereal is concerned about corn prices. The firm anticipates needing 1 million bushels of corn in one month. The current price of corn is $6.60 per bushel and the futures price for delivery in one month is $7.25 per bushel. The cost to store the corn for 1 month is $150 000. What should the firm do?

• A)Hedge with futures for a total cost of $6 600 000.
• B)Hedge with futures for a total cost of $7 250 000.
• C)Buy the corn now and store for 1 month, for a total cost of $6 750 000.
• D)Buy the corn now and store for 1 month, for a total cost of $6 500 000.

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Definitions:

Frustration Quotient

A term that may be used to measure the level of frustration experienced by individuals in certain situations, but it is not a widely recognized or standardized metric in psychology or organizational behavior. NO.

Psychological Consequences

The effects or outcomes on an individual's mental and emotional state due to certain events or conditions.

Behavioural

Related to the actions or reactions of individuals or groups in response to external or internal stimuli.

Physiological

Relating to the functions of living organisms and their parts.