On May 1, a soybean producer is expecting a crop of over 60,000 bushels. They would like to sell the crop soon after the October harvest. They are fairly certain that prices are heading down, so they want to lock in a price for December delivery. They decide to hedge 50% of their production. The November futures price today is $12.82. and the local forward cash for November is $12.57. Brokerage fees for each contract is $15.00 round-turn. In November, futures prices are $12.20 and cash prices are $12.27. What was the net price received per bushel for this scenario?
On May 1, a soybean producer is expecting a crop of over 60,000 bushels. They would like to sell the crop soon after the October harvest. They are fairly certain that prices are heading down, so they want to lock in a price for December delivery. They decide to hedge 50% of their production. The November futures price today is $12.82. and the local forward cash for November is $12.57. Brokerage fees for each contract is $15.00 round-turn. In November, futures prices are $12.20 and cash prices are $12.27. What was the net price received per bushel for this scenario?
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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Transcribed Image Text:On May 1, a soybean producer is expecting a crop of over 60,000 bushels.
They would like to sell the crop soon after the October harvest. They are
fairly certain that prices are heading down, so they want to lock in a price
for December delivery. They decide to hedge 50% of their production.
The November futures price today is $12.82. and the local forward cash
for November is $12.57.
Brokerage fees for each contract is $15.00 round-turn.
In November, futures prices are $12.20 and cash prices are $12.27.
What was the net price received per bushel for this scenario?
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