Sugar is currently selling for $.201 a pound while the 6-month futures price is $.208. You take a long position in the 6-month sugar futures. Which one of the following prices would cause you the greatest loss if that price turns out to be the actual price of sugar per pound 6 months from now?
A)$.198
B)$.201
C)$.205
D)$.208
E)$.211

Question

Quizplus · Accepted Answer

The greatest loss would occur if the price of sugar falls below the futures price you agreed upon ($.208). Among the given options, $.198 is the lowest and therefore, if sugar's price drops to this level, it would result in the greatest loss compared to the futures price you locked in.

Sugar Is Currently Selling for