KidCo. Cereal Company sells "Sugar Corns" for $2.50 per box. The company will need to buy 20,000 bushels of corn in 6 months to produce 40,000 boxes of cereal. Non-corn costs total $60,000
What is the company's profit if they purchase call options at $0.12 per bushel with a strike price of $1.60? Assume the 6-month interest rate is 4.0% and the spot price in 6 months is $1.65 per bushel.
A)
$6,504 profit
B)
$8,005 loss
C)
$12,064 profit
D)
$11,293 loss
Answer:
A
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