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Today is 04/30/20xy. You have a commodity to sell in a month, and you would like to lock the price at $40 by hedging with futures.

Since you are not selling a professionally traded commodity, you take a modified version of futures contract which is marked to the market every week as opposed to every day. The margin account is no-interest-bearing and is not invested on other risk-free securities. T

he futures price of the commodity you are selling is $42 on 05/01, $39 on 05/08, $41 on 05/15, $37 on 05/22, $39 on 05/29.

Assume you enter the contract today and will make the delivery on 05/30, using the 05/29 price.

Build a cash flow table of the futures contract on the date listed above (4/30 -5/30) in the format of the table shown in class, showing all the calculation details.

Show the profit/loss you have made by using the futures contract.

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92866937

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