Nbspassume you are a feed manufacturer it is december and, Ask an Expert

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Assume you are a feed manufacturer. It is December and you are planning the corn purchase for April. To protect against rising price, you put on a long hedge by purchasing a May Corn futures contract at $5.75 per bushel. Suppose that the basis is 5 cents under when you actually buy corn from your supplier in April.

(i) What would be the net purchase price in April if the May Corn futures price is $5.58?

Cash purchase price ____________

Gain/loss on futures position ____________

Net purchase price ____________

(ii) What would your net purchase price be if May Corn futures is $5.80 and the basis is 7 cents over when you offset your futures position in April?

Cash purchase price ____________

Gain/loss on futures position ____________

Net purchase price ____________

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92866959

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