Question
You are a wheat farmer and want to hedge your business risk associated with changes in the price of wheat. Suppose you use a futures
You are a wheat farmer and want to hedge your business risk associated with changes in the price of wheat.
Suppose you use a futures contract to hedge the risk. Suppose you were to draw a diagram of your underlying business position, in which the diagram displays the change in the price of wheat on the horizontal axis and your gain / loss on the vertical axis. The diagram would:
A) Slope down from the upper left to the lower right of the diagram.
B) Slope up from the lower left to the upper right of the diagram.
C) Have zero slope represented by a horizontal line.
D) Exhibit a U-shaped pattern.
E) Exhibit an upside down U-shaped pattern.
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