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  3. in 2020, a local cannabis grower entered into a fo

In 2020, a local cannabis grower entered into a forward contract with a distributor in...

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Accounting

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In 2020, a local cannabis grower entered into a forward contract with a distributor in order to lock in a price for 500 pounds of their product at $1,500 per pound to be delivered one year into the future. At the time in 2020, cannabis was trading for $1,200 per pound so the farmer was betting on a significant increase in the price. Demand was high in 2020 but supply was low given the emergence of new markets across the country. Once the contract expired one year into the future, the price of cannabis in the distribution market actually traded for $1,750 per pound. Did the farmer make a wise decision? In at least 2 sentences, explain and use math to validate your

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