Suppose that Becky, a corn farmer, enters into a one-year futures contract today

Question

Suppose that Becky, a corn farmer, enters into a one-year futures contract today with Alex to make a delivery of 5,000 bushels of corn at $3 per bushel. Which of the following statements are true? Check all that apply. Becky is insuring herself against a fall in corn prices to less than $3 per bushel one year later. Becky has the obligation to make the delivery of 5,000 bushels of corn at $3 per bushel to Alex one year later, regardless of the market price of corn at that time. Becky will benefit from the contract if the corn price rises to $3.75 per bushel one year later.

Explanation / Answer

Statement 1 AND statement 2 are true.

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