1. Suppose you are long in the cash market for soybeans (you are a farmer), and the current cash price of soybeans on the exchange is $10.10/bu. To offset your price risk you purchase a put option with a strike price of $10.00/bu. The basis at your local coop is $-0.50/bu., and you expect this to remain the same until the end of your hedge. You purchase the option for $0.30/bu. What is the intrinsic value of the option when you purchase it?

2. Suppose you are long in the cash market for soybeans (you are a farmer), and the current cash price of soybeans on the exchange is $10.10/bu. To offset your price risk you purchase a put option with a strike price of $10.00/bu. The basis at your local coop is $-0.50/bu., and you expect this to remain the same until the end of your hedge. You purchase the option for $0.30/bu. What is the price floor that you establish for selling your beans at the local coop?

3. Suppose you are long in the cash market for soybeans (you are a farmer), and the current cash price of soybeans on the exchange is $10.10/bu. To offset your price risk you purchase a put option with a strike price of $10.00/bu. The basis at your local coop is $-0.50/bu., and you expect this to remain the same until the end of your hedge. You purchase the option for $0.30/bu. If the price of soybeans on the exchange at the end of your hedge is $10.20/bu. What is the NET price that you receive when you sell your beans at the local coop?