o hedge the price risk, should you buy or sell December wheat futures? How many contracts should you trade? Responses a sell 7 b buy 7 c sell 8 d buy 8

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A: Option Pricing model: There are two prominent option pricing models that are prevalent today. They…

Q: Backwardation and Contango In January 5th of 2018, you took a short postion on 100 Feeder Cattle…

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Q: Maintenance margin = 600$ Assume the volatility of Soybean Oil immediately increases 20%. How will…

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A: An arbitrage trade is possible if the upfront cost of the truck rental, x, plus the cost of the bet,…

Q: How should this farmer hedge

A: Futures contract is a standardized contract between two parties to buy or sell an asset, such as…

Q: a. What is the net selling price from hedging using the PUT? b. What price would the producer have…

A: on may 19th Cash price =775 per tonne an put @20 Futures = 800 on Oct 15th Cash price=825-5=800…

Q: How to pricing the future contract over times. For example the spot price at t=0 is $1050, risk free…

A: Here, Spot Price at t=0 is $1,050 Risk Free Rate is 7% Dividend Yield is 5% Storage Cost is 1% Time…

Q: Price a 3 month call using a one step binomial tree where the risk free rate is 1.00%. Where S0 is…

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Q: Today, the July 2022 coffee futures price is trading at 120 cents per pound. Fast forward to late…

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Q: 9)

A: Thus, deduced (practical fit) closely: Net convenience field: $3.39 per bushel

Q: 1)You bought a T-bill a few days ago. Now, you want to sell it. The price quotation for this T- Bill…

A: Bid Price = 94.26 Ask price = 94.96 Days to maturity = 110 Face Value = 100

Q: Example • A farmer sells two soybean futures contracts at a price of $8.91 per bushel. The spot…

A: 1-2Calculation of Proceeds from Sale:1. The proceeds from sale is $125,300.2. The proceeds from sale…

Q: Gasworks, Incorporated, has been approached to sell up to 4 million gallons of gasoline in three…

A: A two-state model refers to the method of calculating the price of the option where the final value…

Q: You are the buyer for a cereal company and you must buy 80,000 bushels of corn next month. The…

A: The objective of the question is to determine the number of futures contracts that need to be…

Q: You are buying a sofa. You will pay $360 today and make three consecutive annual payments of $460 in…

A: Solution: When an asset is bought by paying the money in instalments, the actual price is calculated…

Q: Production Hedge: A cattle producer wanted to purchase the soybean from the market. On February 1,…

A: Prices of commodities fluctuate normally which creates a risk factor for the dealers. Hedging is a…

Q: Using the same begging portion of the above problem --A cotton buyer will be making a purchase of…

A: The cash market and future market are related to each other and they move opposite to each other and…

Q: Only B There are two apple orchards, in Chicago and NYC. Driving between the apple orchards takes 8…

A: An arbitrage trade is possible if the upfront cost of the truck rental, x, plus the cost of the bet,…

Q: A farmer is currently growing wheat and plans to sell it in September next year. He needs to plan…

A: To lock in the future revenue for selling 2 tons of wheat in September, the farmer can make use of…

Q: The day ahead PJM market for on peak power is trading $80/MWh. The bid for the four (4) hour super-…

A: a) If you buy the day ahead on peak swap for $80/MWh and sell the super peak swap for $120/MWh, you…

Q: Consider a risk averse food producer at March 20, 2023 seeking to hedge corn purchases from March…

A: Hedged returns are the offset difference between the spot returns and the futures returns. Farmers…

Q: Suppose that the price of corn is risky, with a beta of 0.4. The monthly storage cost is $0.09 per…

A: Beta=0.4Monthly storage cost=$0.09 per bushelCurrent spot price =$2.87Expected spot price in 3…

Q: Suppose the initial margin on heating oil futures is $8,500, the maintenance margin is $7,000 per…

A: Given, Initial Margin = $8,500 Maintenance Margin = $7,000 Purchase of 16 contract Each Contract =…

Q: A farmer sells futures contracts at a price of $3.65 per bushel. The spot price of corn is $3.15 at…

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Q: Q10: Stefano has 450 bushels of wheat that he wants to sell in exactly 10 months time. The current…

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Q: This is a follow up question so I copied/pasted the same question below for your convenience: An…

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Q: As a US exporter selling to Europe. You wish to hedge a 1,040,000 Euro to be received in 3 months…

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Q: What is the estimated price if this person hedges?

A: The grain farmer has produced 200,000 bushels of corn which he wants to sell next spring. He is…

Q: None

A: Analyze the given strategies:Go short 12 six-month futures contracts; pay £555,600. By going short…

Q: Scenario 3 As a cut and wrap cheese processor, you forward sell chunk cheddar cheese based on…

A: Hedging is a risk management tactic employed by people, businesses, or investors to guard against…

Q: You have called your foreign trader and asked for quotations USD/INR in spot market, 1-month,…

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Q: Phoenix Motors wants to lock in the cost of 10,000 ounces of platinum to be used in next quarter's…

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Q: Suppose that you are a wheat farmer. Answer the following questions. It is August, and you intend to…

A: Wheat harvested in August50,000Future contract in August5,000Current spot market price in…

Q: 7. On January 28, the local cash price for winter wheat is $3.50 per bushel and the March future at…

A: Local price on January 28 = $3.50 per bushel March future = $3.70 per bushel

Q: a) Explain the difference between a stop order to sell at 30 and a stop-limit order to sell at 30…

A: Since you have asked multiple question, we will solve the first question for you. If you want any…

Q: 1) Who takes the long futures position? Who takes the short position? 2) At Month 0, what is the…

A: Hi There, thanks for posting the question. But as per Q&A guidelines, we must answer the first…

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Q: Diamond's investment in a dollar yield farm is earning 7.58% compounded quarterly and will be worth…

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Q: 5. On June, an investor bought five (10 tons per contract) of soybean futures at $3,000 per ton.…

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Q: Waleed wants to get a 5.5% of return to his investment in 1 year. In Oman, inflation is 6.74%. What…

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Q: None

A: Cost of harvesting = $212,000Total bushels = 20,000Call premium = $1.15Put premium = $0.65Risk-free…

Q: You hedged your corn purchase by buying and then selling two corn calls. The total price you paid…

A: Hedging is a risk management strategy used by investors and businesses to protect themselves against…

Q: In February, a company wanted to hedge the future purchase of crude oil some time in June or July by…

A: Calculate the net cost of purchasing the oil with hedging again:

Q: Suppose the farmer takes a futures position on his expected production of wheat in September. Will…

A: To determine whether the farmer's futures position will help him reduce his risk, we need to compare…

Q: With a dry summer forecast, you expect that the soybean harvest will be smaller than normal and that…

A: The quantity and quality of the underlying product, the delivery date, and the settlement method are…