A farmer agreed to sell corn in 6 months from now, at the spit price (S2) of that day. To reduce his price risk, he took a short position in the futures market for F1 = £10. What is the effective price he received if 6 months from now, F2 = £8 and S2 = £7

International Financial Management
14th Edition
ISBN:9780357130698
Author:Madura
Publisher:Madura
Chapter5: Currency Derivatives
Section: Chapter Questions
Problem 5ST
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A farmer agreed to sell corn in 6 months from now, at the spit price (S2) of that day. To reduce his price risk, he took a short position in
the futures market for F1 = £10. What is the effective price he received if 6 months from now, F2 = £8 and S2 = £7
Transcribed Image Text:A farmer agreed to sell corn in 6 months from now, at the spit price (S2) of that day. To reduce his price risk, he took a short position in the futures market for F1 = £10. What is the effective price he received if 6 months from now, F2 = £8 and S2 = £7
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