In June, Jack forward contracted 1/3 of his crop with a local ethanol plant for December...

   

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In June, Jack forward contracted 1/3 of his crop with a local ethanol plant for December delivery at $5.00 per bushel. He hedged 1/3 of his crop with December Futures at $5.50 per bushel. Jack also bought put options for $6.00 strike price at a premium of $0.65 per bushel for the last 1/3 of his crop. a. If December Cash Price is 6.25 and December Futures are $6.60, what is his price per bushel for each of his crop shares? Forward Contracted Bushels: (2 pts.) Hedged Bushels: (3 pts.) Put Options: (3 pts.) b. If December Cash Price is $4.65 and December Futures are $5.00, what is his price per bushel for each of his crop shares? Forward Contracted Bushels: (2 pts.) Hedged Bushels: (3 pts.) b. If December Cash Price is $4.65 and December Futures are $5.00, what is his price per bushel for each of his crop shares? Forward Contracted Bushels: (2 pts.) Hedged Bushels: (3 pts.) Put Options: (3 pts.) c. Which Strategy worked better when prices increased? (Part A) (2 pts.) d. Which Strategy worked better when prices decreased? (Part B) (2 pts) e. If you don't know what markets will do, what option would you choose and why? (2 pts) In June, Jack forward contracted 1/3 of his crop with a local ethanol plant for December delivery at $5.00 per bushel. He hedged 1/3 of his crop with December Futures at $5.50 per bushel. Jack also bought put options for $6.00 strike price at a premium of $0.65 per bushel for the last 1/3 of his crop. a. If December Cash Price is 6.25 and December Futures are $6.60, what is his price per bushel for each of his crop shares? Forward Contracted Bushels: (2 pts.) Hedged Bushels: (3 pts.) Put Options: (3 pts.) b. If December Cash Price is $4.65 and December Futures are $5.00, what is his price per bushel for each of his crop shares? Forward Contracted Bushels: (2 pts.) Hedged Bushels: (3 pts.) b. If December Cash Price is $4.65 and December Futures are $5.00, what is his price per bushel for each of his crop shares? Forward Contracted Bushels: (2 pts.) Hedged Bushels: (3 pts.) Put Options: (3 pts.) c. Which Strategy worked better when prices increased? (Part A) (2 pts.) d. Which Strategy worked better when prices decreased? (Part B) (2 pts) e. If you don't know what markets will do, what option would you choose and why? (2 pts)

Answer rating: 100% (QA)

ANSWER a Forward Contracted Bushels Price per bushel Forward contract price 500 per bushel Hedged Bushels Price per bushel December Futures price 550 ... View the full answer