You purchased one corn future contract at $2.29 per bushel.What would be your profit (loss) at maturity if the corn spot price at that time were $2.10 per bushel? Assume the contract size is 5,000 bushels and there are no transactions costs.

Question

Quizplus · Accepted Answer

The profit (P) or loss (L) from a futures contract can be calculated using the following formula:
P/L = (F - S) x CS
where F is the futures price, S is the spot price, and CS is the contract size.

In this case, F = $2.29 per bushel, S = $2.10 per bushel, and CS = 5,000 bushels. Plugging these values into the formula, we get:
P/L = ($2.29 - $2.10) x 5,000 = $95 loss

Therefore, the correct choice is C, which represents a loss of $950.

You Purchased One Corn Future Contract at $2