onsider a producer who is in the business of producing Cocoa for future sale. At the time of 0 (i.e., present time), we have S(0) = $1652, F(0) = $1675. The firm is expecting to sell the Cocoa in 2 months, while the delivery date of the futures contract is 3 months away. Assume that the price of Cocoa in two months is unpredictable, but we know that the future price in two months will be $8 higher than the spot price of Cocoa in two months (i.e., F(t) = S(t) + $8).

Question 18. Without hedging, what is the firm's net profit at date t (i.e., in two months)?

Question 18 options:

A)

$23

B)

$8

C)

$31

D)

$15

E)	Cannot be determined.

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