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Suppose today is May 1, 2014, and your firm produces breakfast cereal and needs 115,000 bushels of corn in July 2014 for an upcoming promotion. You would like to lock in your costs today because you are concerned that corn prices might rise between now and July. Use Table 23.1

a. What total cost would you effectively be locking in based on the closing price of the day? (Round your answer to the nearest whole number, e.g., 32.)

Total cost $

b. Suppose corn prices are $5.03 per pound in July. What is the profit or loss on your futures position? (Enter your answer as a positive number. Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)

(Click to select) ProfitLoss $

Financial Management, Finance

  • Category:- Financial Management
  • Reference No.:- M92743970

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