A grain exporter needs 1.9 million bushels of wheat to export in the month of December. In August, they are fairly certain wheat prices are going to go up, so they want to lock in prices for November purchase. They decide to hedge and purchase December KC HRW contracts. In August, the December futures price is $8.9875 with a basis of - $0.09. Brokerage fees for each contract is $5.00 round turn. On November 15, December KC HRW futures are trading at $9.0475 per bushel and the cash price is $8.9975. What was the net price paid per bushel for this scenario?

A grain exporter needs 1.9 million bushels of wheat to export in the month of December. In August, they are fairly certain wheat prices are going to go up, so they want to lock in prices for November purchase. They decide to hedge and purchase December KC HRW contracts. In August, the December futures price is $8.9875 with a basis of - $0.09. Brokerage fees for each contract is $5.00 round turn. On November 15, December KC HRW futures are trading at $9.0475 per bushel and the cash price is $8.9975. What was the net price paid per bushel for this scenario?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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