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The futures price of a commodity such as wheat is $2.50 a bushel.
Futures contracts are for 10,000 bushels, and the margin requirement is $2,500 a contract. The maintenance market requirement is $1,000. A speculator expects the price of the commodity to rise and enters into a contract to buy wheat.
d. If the futures price rises to $2.70, what must the speculator do?
e. If the futures price continues to decline to $2.32, how much does the speculator
have in the account?
Future are traded in market to earn profit by hedging.
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Solved in 3 steps
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- A cheese factory wants to protect their purchase price of milk so they hedge in milk futures at a price of $19.10. Expected basis is +$0.90. On the day they exit the futures market, the futures price is $18.90 and actual basis is +$0.50. Find the net price they will pay for milk.A farm that produces corn is looking to hedge their exposure to price fluctuations in the future. It is now May 15th and they expect their crop to be ready for harvest September 30th. You have gathered the following information: Bushels of corn they expect to produce 44,000 May 15th price per bushel $3.08 Sept 30 futures contract per bushel $3.22 Actual market price Sept 30 $3.37 Required (round to the nearest dollar): Calculate the gain or loss on the futures contract and net proceeds on the sale of the corn. Net gain or loss on future $Answer Sell the corn $Answer Net $AnswerPlease answer it with no descriptions or details, with the question numbers and answers, the exact way it should go on according to the red regulations, thank you!
