Jean Corngrower sells her corn to the elevator when she finishes harvest on October 30. She gets $6.55/bu for her corn. Jean wants to avoid storage costs and related interest costs, but she also wants to take advantage of any seasonal price movement upward. She buys a March 640 corn call for $0.35/bu. Come late January March corn futures are trading at $6.87/bu. Jean decides to get out of the call at that time. What is Jean’s realized price for the corn, not including brokerage fees or interest costs?
Jean Corngrower sells her corn to the elevator when she finishes harvest on October 30. She gets $6.55/bu for her corn. Jean wants to avoid storage costs and related interest costs, but she also wants to take advantage of any seasonal price movement upward. She buys a March 640 corn call for $0.35/bu. Come late January March corn futures are trading at $6.87/bu. Jean decides to get out of the call at that time. What is Jean’s realized price for the corn, not including brokerage fees or interest costs?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Jean Corngrower sells her corn to the elevator when she finishes harvest on October 30. She gets $6.55/bu for her corn. Jean wants to avoid storage costs and related interest costs, but she also wants to take advantage of any seasonal price movement upward. She buys a March 640 corn call for $0.35/bu. Come late January March corn futures are trading at $6.87/bu. Jean decides to get out of the call at that time. What is Jean’s realized price for the corn, not including brokerage fees or interest costs?
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