Question
A corn farmer enters a corn futures contract in September 2020 with delivery in March 2021. On the day of the entry into the position,
A corn farmer enters a corn futures contract in September 2020 with delivery in March 2021.
On the day of the entry into the position, the futures price is 380 cents per bushel. Each futures contract is for delivery of 5,000 bushels.
How much does the farmer gain or lose if the corn price on the delivery date of the contract (March 2021) is:
(a) 350 cents per bushel (the corn harvest was plentiful, and the price dropped)
(b) 425 cents per bushel (bad weather caused a poor corn harvest) In which situation do you think the farmer is better off?
In which situation do you think the farmer is better off?
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Essential Personal Finance A Practical Guide For Students
Authors: Lien Luu, Jonquil Lowe, Jason Butler, Tony Byrne
1st Edition
1138692956, 978-1138692954
