Help Layout References Mailings Review View A A A A E ALT "No Spa Heading 1 Heading 2 Title 1 Norma Paragraph You manage a grain storago elevator. It is January and you bought 30,000 bushels of com at $2.99/bu in the cash market with the purpose to sell it all in May and were concerned its value may move against you while you had ownership. Thus, you initiate a hedge to protect against an adverse price movement. The CME May com futures are trading at $3.25/bu. In May, the com futures price has decreased to $3.07/bu and the cash price has decreased to $2.85/bu. Assume the broker charges you a commission of S100 per contract a. What is the position you should take in the futures market? b. What kind of an adverse price movement are you trying to protect against by hedging: increasing prices or decreasing prices? c. What is the number of futures contracts needed to fully hodge your com on hand? d. What is the target price? e. Compute the gain/loss in the futures market. 1. Has the basis strengthened weakened? How do you know? Is it good/bad from your perspective? g. Is this a perfect hedge? hi Calculate the effective selling price (ESP) i Calculate your futures account net gain loss accounting for broker's commission