The effective six-month interest rate is 40 and she plans

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Corn call options with a $1.70 strike price (per bushel of corn) are trading for a $0.15 premium. Farmer Jayne decides to sell 20,000 bushels of corn she is going to produce in six months. She also writes call options described above on her 20,000 bushels. The effective six-month interest rate is 4.0% and she plans to close her position and sell her corn in 6 months. What is her profit or loss if spot prices are $1.60 per bushel when she closes her position?

(a) $32,000 loss

(b) $32,000 gain

(c) $35,120 loss

(d) $35,120 gain

(e) None of the above.

Reference no: EM13574231

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