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Question
You, a farmer, anticipate taking 80,000 bushels of soybeans to the market in three months. The current cash price for soybeans is $5.85. The size of the futures contract is 5,000 bushels per contract, and the current three-month futures price is $5.88. You decide to hedge one-half of your exposure to a drop in the value of soybeans. Assume that in three months, when you take the soybeans to market, you close out the futures contracts and the price has fallen to $5.80. What is the total loss in value over the three months on the actual soybeans you produced and took to market?A.$2,400
B.$2,000
C.$6,400
D.$4,000
E.$3,200
Answer
This answer is hidden. It contains 31 characters.
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