Question: Please answer both! A home builder asked for your financial advice on the best method of hedging the price of lumber. He needs to purchase

Please answer both! Please answer both! A home builder asked for your financial advice

A home builder asked for your financial advice on the best method of hedging the price of lumber. He needs to purchase substantial amounts of lumber every year and wants to assure he is not surprised by volatile price of lumber. What advice will you give him? 1) sell lumber futures 2) buy lumber futures 3) not enough information to determine What is the basis? 1 The difference between a forward contract and a futures contract on the same asset 2) The difference between the futures price and the spot price of the same asset 0 3) The sum of the forward price and the futures price - risk-free rate 4) The sum of the ask price and the bid price of a futures contract

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