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A Company Will Buy 1000 Units of a Certain Commodity

Question 3

Multiple Choice

A company will buy 1000 units of a certain commodity in one year.It decides to hedge 80% of its exposure using futures contracts.The spot price and the futures price are currently $100 and $90,respectively.If the spot price and the futures price in one year turn out to be $112 and $110,respectively.What is the average price paid for the commodity?


A) $92
B) $96
C) $102
D) $106

Correct Answer:

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