You grow wheat and figure that you will have 60,000 bushels to sell in the next month. Futures contracts are for 5,000 bushels and are quoted at 7.50 per bushel. If you want to hedge your price risk, what should you do?
A) Sell 12 contracts at a current contract value of $90.
B) Buy 12 contracts at a current contract value of $450,000.
C) Sell 12 contracts at a current contract value of $240,000.
D) Sell 12 contracts at a current contract value of $450,000.
E) Buy 12 contracts at a current contract value of $240,000.

Question

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The Answer of You grow wheat and figure that you will have 60,000 bushels to sell in the next month. Futures contracts are for 5,000 bushels and are quoted at 7.50 per bushel. If you want to hedge your price risk, what should you do?
A) Sell 12 contracts at a current contract value of $90.
B) Buy 12 contracts at a current contract value of $450,000.
C) Sell 12 contracts at a current contract value of $240,000.
D) Sell 12 contracts at a current contract value of $450,000.
E) Buy 12 contracts at a current contract value of $240,000.

You Grow Wheat and Figure That You Will Have 60,000