Table 6.1
$\begin{array}{lccc}
\begin{array}{c}
\text { Expiration } \
\text { Time }
\end{array} & \begin{array}{c}
\text { Wheat } \
\text { Cents/Bushel }
\end{array} & \begin{array}{c}
\text { Corn } \
\text { Cents/Bushel }
\end{array} & \begin{array}{c}
\text { Soybeans } \
\text { Cents/Bushel }
\end{array} \
\hline \text { Today }=\text { spot } & 540 & 610 & 1320 \
6 \text { months } & 560 & 600 & 1350 \
12 \text { months } & 590 & 587 & 1480 \
18 \text { months } & 625 & 580 & 1370 \
24 \text { months } & 655 & 570 & 1265
\end{array}$
-Refer to the table 6.1.If wheat farmers expect a return of 8.0% on their investment in wheat,what is the approximate implied increase in wheat commodity prices over the next 6 months?
A) 3.75%
B) 4.59%
C) 5.26%
D) 6.37%

Question

Table 6.1
 $\begin{array}{lccc}
\begin{array}{c}
\text { Expiration } \
\text { Time }
\end{array} & \begin{array}{c}
\text { Wheat } \
\text { Cents/Bushel }
\end{array} & \begin{array}{c}
\text { Corn } \
\text { Cents/Bushel }
\end{array} & \begin{array}{c}
\text { Soybeans } \
\text { Cents/Bushel }
\end{array} \
\hline \text { Today }=\text { spot } & 540 & 610 & 1320 \
6 \text { months } & 560 & 600 & 1350 \
12 \text { months } & 590 & 587 & 1480 \
18 \text { months } & 625 & 580 & 1370 \
24 \text { months } & 655 & 570 & 1265
\end{array}$
-Refer to the table 6.1.If wheat farmers expect a return of 8.0% on their investment in wheat,what is the approximate implied increase in wheat commodity prices over the next 6 months?
A) 3.75%
B) 4.59%
C) 5.26%
D) 6.37%

Quizplus · Accepted Answer

To calculate the implied increase in wheat commodity prices over the next 6 months, we need to use the following formula:

Implied Increase = (1 + Return on Investment)^(Time in Years) - 1

Here, the time is 6 months, which is 0.5 years, and the return on investment for wheat farmers is 8.0%.

So, the implied increase in wheat commodity prices over the next 6 months will be:

Implied Increase = (1 + 0.08)^(0.5) - 1
Implied Increase = 0.0459 or 4.59%

Hence, the correct choice is B.

Table 61 -Refer to the Table 6