Monique grows and exports cocoa. Her crop was partially ruined in a storm, so she needs to purchase 20 tons of cocoa in three months to meet prior contractual obligations. Monique wants to
Hedge against price changes. Each futures contract is for 10 metric tons. The current quote for the
Contract is 1,447 per ton. Monique should _____ 2 futures contracts with a total contract value of:

Question

Quizplus · Accepted Answer

Monique wants to hedge against price changes, so she should buy futures contracts. Each futures contract is for 10 metric tons, and she needs to purchase 20 tons of cocoa, so she should buy 2 futures contracts. The current quote for the contract is 1,447 per ton, so the total contract value is 2 * 10 * 1,447 = $28,940.

Monique Grows and Exports Cocoa