If we consider the storage cost of $0.35/bu at the beginning, recalculate the following questions: 1. Suppose the elevator buys 100,000 bushels of corn on Nov 1 at $2.00/bu in cash market, and store the corn to sell in the cash market until Jun 1 at $2.30/bu. What is the elevators gain or loss in cash market? 2. On Nov 1, the elevator could sell corn futures contract at $2.50/bu and buy the contract back on Jun 1 at $2.4/bu. What is the elevators gain or loss in futures market? 3. Calculate the basis for both Nov 1 and Jun 1. 4. Calculate the total return of corn to the elevator through such hedging in the futures market? 5. What

If we consider the storage cost of $0.35/bu at the beginning, recalculate the following questions: 1. Suppose the elevator buys 100,000 bushels of corn on Nov 1 at $2.00/bu in cash market, and store the corn to sell in the cash market until Jun 1 at $2.30/bu. What is the elevators gain or loss in cash market? 2. On Nov 1, the elevator could sell corn futures contract at $2.50/bu and buy the contract back on Jun 1 at $2.4/bu. What is the elevators gain or loss in futures market? 3. Calculate the basis for both Nov 1 and Jun 1. 4. Calculate the total return of corn to the elevator through such hedging in the futures market? 5. What

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 1PA: Your company is planning to purchase a new log splitter for is lawn and garden business. The new...

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Question

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If we consider the storage cost of $0.35/bu at the beginning, recalculate the following questions:

1. Suppose the elevator buys 100,000 bushels of corn on Nov 1 at $2.00/bu in cash market, and store the corn to sell in the cash market until Jun 1 at $2.30/bu. What is the elevators gain or loss in cash market?

2. On Nov 1, the elevator could sell corn futures contract at $2.50/bu and buy the contract back on Jun 1 at $2.4/bu. What is the elevators gain or loss in futures market?

3. Calculate the basis for both Nov 1 and Jun 1.

4. Calculate the total return of corn to the elevator through such hedging in the futures market? 5. What is the net profit/loss through above hedging in the futures market?

Definition Definition Amount earned or lost on the sale of one or more items is referred to as the profit or loss on that item

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