Question: Correct answer is in brackets. Why is it zero? Your firm will be selling 86,000 bushels of wheat in January. Your firm is concerned that

Correct answer is in brackets. Why is it zero?

Your firm will be selling 86,000 bushels of wheat in January. Your firm is concerned that wheat prices may drop by January. Call options are available with a strike price of $3.90. The cost of the call option is $0.98. Put options are available with a strike price of $3.90. The cost of the put option is $0.64. If the price of wheat in January is $6.22, what is the payoff on the option contracts the firm entered into to hedge its risk? Your answer should be accurate to two decimal places. If you believe the answer is zero it should be recorded as 0.00. Answer: 199,520.00(0.00)

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