Question: 14-6 Farmer Brown grows Number 1 red corn and would like to hedge the value of the coming harvest. However, the futures contract is traded

14-6

14-6 Farmer Brown grows Number 1 red corn and would like to

Farmer Brown grows Number 1 red corn and would like to hedge the value of the coming harvest. However, the futures contract is traded on the Number 2 yellow grade of corn. Suppose that yellow corn typically sells for 94% of the price of red corn. If he grows 178,600 bushels, and each futures contract calls for delivery of 5,000 bushels, how many contracts should Farmer Brown buy or sell to hedge his position? (Round your final answer to the nearest whole number.)

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