Question: 1. Suppose that a farmer plants corn that will be sold in October. a. What is the farmer's spot market position in corn? b.

1. Suppose that a farmer plants corn that will be sold in

1. Suppose that a farmer plants corn that will be sold in October. a. What is the farmer's spot market position in corn? b. To hedge the corn sale in the spot market in October, what will be the farmer's trades in the futures market look like? c. If corn prices go up will the farmer make a profit or loss on his hedge position? d. Describe how the farmer's futures markets trades hedge the spot market price of the farmer's corn. 2. JL Distribution (JLD) plans to hedge its November purchase of crude oil. a. What is JLD's spot market position in crude oil? b. To hedge the November spot market crude oil purchase, what will be JLD's trades in the futures market look like? c. If crude oil prices go up will JLD make a profit or loss on its hedge position? d. Describe how JLD's futures markets trades hedge the spot market price of its crude oil. price of 77.55. One month later

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