You purchased one wheat future contract at $3.04 per bushel.What would be your profit (loss)at maturity if the wheat spot price at that time were $2.98 per bushel? Assume the contract size is 5,000 ounces and there are no transactions costs.

Question

Quizplus · Accepted Answer

The profit or loss on a futures contract is calculated by taking the difference between the purchase price and the spot price at the time of maturity and multiplying it by the contract size.

Profit or loss = (Spot price at maturity - Purchase price) x Contract size

In this case, the purchase price is $3.04 per bushel, and the spot price at maturity is $2.98 per bushel.

Profit or loss = ($2.98 - $3.04) x 5000 = -$30 x 10 = -$300

Since the result is negative, it implies a loss of $300. Therefore, the best choice is,
C) $300 loss

You Purchased One Wheat Future Contract at $3