A manufacturer of breakfast cereal is concerned about corn prices. The firm anticipates needing 1 million bushels of corn in one month. The current price of corn is $6.50 per bushel and the futures price for delivery in one month is $7.00 per bushel
The cost to store the corn for 1 month is $100,000. What should the firm do?
A) Hedge with futures for a total cost of $7,000,000.
B) Hedge with futures for a total cost of $6,900,000.
C) Buy the corn now and store for 1 month, for a total cost of $6,500,000.
D) Buy the corn now and store for 1 month, for a total cost of $6,600,000.
Answer: D
You might also like to view...
_____________: High involvement, high time, high cost, internal and external info search, many alternatives
Fill in the blank(s) with the appropriate word(s).
In May, 1996, Mr. Sanders leased a unit in his apartment house to a tenant for a two-year term. The tenant prepaid the last two months' rent at the time he entered into the lease agreement. For federal income tax purposes, that amount will be considered as income for Mr. Sanders:
A: In May, 1996; B: In May, 1998; C: Will be prorated throughout the term of the lease; D: When it is actually earned.