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 ounces and there are no transactions costs.

Question

Quizplus · Accepted Answer

The formula to calculate profit or loss for a futures contract is: 
Profit/Loss = (Futures price at maturity - Futures price at purchase) x Contract size 
Using this formula, we can calculate the profit/loss as: 
Profit/Loss = ($2.10 - $2.29) x 5000 
Profit/Loss = (-0.19) x 5000 
Profit/Loss = -$950 
Since the spot price is lower than the purchase price, the investor would face a loss of $950 at maturity. Therefore, the correct answer is C, $950 loss.

You Purchased One Corn Future Contract at $2