Question: 5) Two 6-month corn put options are available. The strike prices are $1.80 and $1.75 with premiums of $0.14 and $0.12, respectively. Total costs are

5) Two 6-month corn put options are available. The strike prices are $1.80 and $1.75 with premiums of $0.14 and $0.12, respectively. Total costs are $1.65 per bushel and 6-month interest rates are 4.0%. Farmer Jayne wishes to hedge 20,000 bushels for 6 months. What is the highest prot or minimum loss between the two options if the spot price in 6 months is $1.70 per bushel? A) $88 loss B) $88 gain C) $496 loss D) $496 gain Answer: B

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