You expect to deliver 250,000 bushels of corn to the market in July. Today, you hedge your position at the closing price as shown in the table. Assume that the market price turns out to be 248.7 at the
Time you make your delivery in July. How much income will you receive in total from the hedged
Delivery of your corn?
Corn - 5,000 bu.; cents per bu.

Question

Quizplus · Accepted Answer

To determine the total income, we need to calculate the total revenue from the delivery of corn and subtract the cost of the hedge.

Total revenue = 250,000 bushels x $2.487/bushel = $621,750
Cost of hedge = 5,000 bushels x $2.71/bushel = $13,550

Total income = Total revenue - Cost of hedge 
Total income = $621,750 - $13,550 = $608,200

Therefore, the correct answer is D) $630,250

You Expect to Deliver 250,000 Bushels of Corn to the Market