Multiple Choice
A company will buy 1000 units of a certain commodity in one year. It decides to hedge 80% of its exposure using futures contracts. Spot price and futures price are currently $100 and $90. The one year futures price of the commodity is $90. If the spot price and the futures price in one year turn out to be $112 and $110, respectively. What is the average price paid for the commodity?
A) $92
B) $96
C) $102
D) $106
Correct Answer:
Verified
Correct Answer:
Verified
Q2: Which of the following is true?<br>A) Hedging
Q3: The basis is defined as spot minus
Q4: Which of the following increases basis risk?<br>A)
Q6: Which of the following best describes the
Q7: Which of the following is true?<br>A) The
Q11: Which of the following best describes "stack
Q12: Which of the following is a reason
Q13: On March 1 a commodity's spot price
Q17: Futures contracts trade with every month as
Q20: Which of the following is true?<br>A) Gold