A farmer hedged his risk by buying put options on wheat with an exercise price of $2.70 at a price of $0.14 per bushel.If the price of wheat at the expiration of the contract is $2.70, what is the net revenue from each bushel of wheat?
A)$2.56
B)$2.63
C)$2.70
D)$2.84 Revenue from one bushel of wheat = $2.70

Question

Quizplus · Accepted Answer

The net revenue is the exercise price minus the cost of the option: $2.70 - $0.14 = $2.56.

A Farmer Hedged His Risk by Buying Put Options on Wheat