eter is a wheat farmer who is concerned with the future decrease in wheat prices. He plans to sell 250,000 bushels of wheat. Additionally, he takes a short position (sells) fifteen wheat contracts to take advantages of future increase in prices. Details of the wheat contract include: Contract size: 5,000 bushels Current (spot) price: $0.80 per bushel Futures price: $0.83 per bushel Calculate his net profit/loss if the price of wheat is $0.78 per bushel at expiration.     $201,750     $198,750     $195,000     $189,750

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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Peter is a wheat farmer who is concerned with the future decrease in wheat prices. He plans to sell 250,000 bushels of wheat. Additionally, he takes a short position (sells) fifteen wheat contracts to take advantages of future increase in prices. Details of the wheat contract include:

  • Contract size: 5,000 bushels
  • Current (spot) price: $0.80 per bushel
  • Futures price: $0.83 per bushel

Calculate his net profit/loss if the price of wheat is $0.78 per bushel at expiration.

   

$201,750

   

$198,750

   

$195,000

   

$189,750

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