The current price of corn is $6.20 per bushel. In addition, the cost of storing the...

 

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The current price of corn is $6.20 per bushel. In addition, the cost of storing the corn for one month (including interest and storage costs) is $0.20 per bushel. There is a futures contract calling for a delivery of 5,000 bushels of corn, one month from today. The current futures price is $6.00 per bushel. You are the CFO of Yummy Corn Flakes Inc. Looking at the data above, you decide to buy and hold inventories of corn during this month and pay the interest and storage costs. WHAT CAN EXPLAIN YOUR DECISION? Circle or highlight the correct answer. (If you cannot circle or highlight, write the question number and the letter of the correct answer.) a) You expect the price of corn to rise after next month. b) You need the corn during this month to produce without interruptions. The current price of corn is $6.20 per bushel. In addition, the cost of storing the corn for one month (including interest and storage costs) is $0.20 per bushel. There is a futures contract calling for a delivery of 5,000 bushels of corn, one month from today. The current futures price is $6.00 per bushel. You are the CFO of Yummy Corn Flakes Inc. Looking at the data above, you decide to buy and hold inventories of corn during this month and pay the interest and storage costs. WHAT CAN EXPLAIN YOUR DECISION? Circle or highlight the correct answer. (If you cannot circle or highlight, write the question number and the letter of the correct answer.) a) You expect the price of corn to rise after next month. b) You need the corn during this month to produce without interruptions.

Answer rating: 100% (QA)

Certainly By buying and holding inventories of corn Yummy Corn Flakes Inc is taking a proactive appr... View the full answer