HOMEWORK ASSIGNMENT #3 1. GENERAL HEDGING The following table presents several situations in which a trader intends to buy or sell an asset at some point in the future and uses futures contracts to hedge the price risk between now and then. The table lists the assets, the intended actions on the spot market, futures prices at which the hedges are initiated and liquidated, the number of futures contracts used, the size of each contract, the spot prices at which the assets are eventually bought/sold, and the size of the asset itself All prices are in dolars per unit of asset. The exact timing of the transactions is not critical. The only relevant fact is that the hedging position is opened now and closed at some point in the future simultaneously with the spot transaction. For example, the firstsituation can be interpreted as the one where the trader plans to sell 28,528bu of corn, opens a position in 48 futures contracts 5,00obu each at s3.6725/bu today (hedge initiation), and, sometime later (hedge liquidation), closes the position at $3.67oo/bu while simultaneously selling 228,528bu of corn on the spot market. For each scenario in the table .identify the position the hedger should take (long or short) .identify the target rice the hedger would expect toreceive/py for the hedged commodity . calculate the hedge ratio used by the hedger calculate the effective net price received or paid for the asset at hedge liquidation determine the basis at the initiation and closing of futures position explain why the target price and the actual (effective net) price are different . Round your results to four decimal places