A large agribusiness firm has contracted to deliver 100,000 bushels of wheat for $4.50 a bushel at the end of October. On the delivery date, the spot price of wheat is $4.70 per bushel. Which of the following is true?

Question

Quizplus · Accepted Answer

The seller of the contract must sell wheat at the agreed price of $4.50 per bushel, missing out on the higher spot price of $4.70, resulting in a $20,000 loss (100,000 bushels * $0.20). Conversely, the buyer profits by the same amount because they pay $4.50 per bushel instead of the spot price of $4.70, saving $20,000.

A Large Agribusiness Firm Has Contracted to Deliver 100,000 Bushels