Suppose it is February,and a speculator believes that the demand for corn in March will be higher than everyone else expects.In this situation,the speculator will
A) bid down the price of March futures contracts.
B) bid down the spot price of corn.
C) give suppliers an incentive to sell more corn in February.
D) buy March futures contracts.

Question

Quizplus · Accepted Answer

The speculator believes that the demand for corn in March will increase, so they would want to buy March futures contracts in anticipation of a price increase in the future. This way, if the demand does increase as expected, the speculator can sell the futures contracts at a higher price and make a profit. If they were to bid down the price of futures contracts or the spot price of corn, it would not align with their belief that the demand will increase, and they would not be able to make a profit. Giving suppliers an incentive to sell more corn in February would not necessarily affect the demand for corn in March, so it would not be a beneficial action for the speculator in this situation.

Suppose It Is February,and a Speculator Believes That the Demand