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It is 1 November. An Australian clothing manufacturer needs to purchase 20 000 kilograms of greasy wool on 18 November. The December futures price for greasy wool is currently AUD 215 per kilogram. The contract size is 2500 kilograms of greasy wool. Design a hedging strategy for this manufacturer using the December futures contract. Using the concept of basis risk, determine the outcome of the hedging strategy if the spot price on 18 November is AUD 200 per kilogram and the futures price is AUD 205 per kilogram.

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92058544

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