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What is the total amount and who will pay the difference

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Question - A farmer has 500,000 sacks of rice to sell 1 year from now and is worried that the price of rice might decline due to relaxation of requirements on the importation of rice. It thus enters into a forward contract with its BDO to sell 500,000 sacks of rice at a price of PHP1,100 per sack in 1 year, with settlement on a cash basis. Assuming that after a year the price of rice is PHP1000, what is the total amount and who will pay the difference? Show your solution.

Reference no: EM133138895

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