Assume you work for a corn merchandising firm. You purchase corn to satisfy export contracts. It is
Question:
Assume you work for a corn merchandising firm. You purchase corn to satisfy export contracts. It is March 1 and your firm is receiving orders and scheduling deliveries of wheat to be shipped the last week of May. You will need 100,000 bushels of corn but you will not have it in storage. You will buy it in the cash market. You must manage this price risk as best as possible. Use the following basis table and futures prices to complete the T-account below. Fill out the empty spaces in the T-account below. Circle the basic information used.
Calculate the net purchase price above. Calculate the difference between the Net Price and the Forward Price. If the Net Price is not equal to the Forward Price then explain why. Was the hedge a good decision?
Processes Systems and Information An Introduction to MIS
ISBN: ?978-0133546750
2nd edition
Authors: Earl McKinney, David M. Kroenke