Question: please show all working Question 6 - Total 8 marks a) A corn planter plans to sell all his corn on the futures market in

please show all working Question 6 - Total 8 marks a)

please show all working

Question 6 - Total 8 marks a) A corn planter plans to sell all his corn on the futures market in August 2021, based on the spot prices at that time. The estimated sale is 100,000 pounds. The current spot price is $ 5,600 for a lot of 100,000 pounds. A futures contract for August 2021, is available for a price of $1200 per contract. The contract size is 100,000 pounds. If the rancher hedges his exposure through the futures contract, how many contracts will he need? What price will he effectively receive if the spot price in March is $0.0550 per pound? What if the spot price in March is $0.0590 per pound? Assume he is able to sell all 100,000 pounds. (4 marks) b) a If the following FOREX quotes are observed, compute the cross rate in the format NZ$/C$ and indicate which of the two currencies is undervalued and which one is overvalued? Does it result in profit making opportunity? What do you call this profit? What will be the profit if you have US$2.2 million to start with? (4 marks) US$ 0.93 / C$ US$0.24/NZS NZ$4.01 / C$ Question 6 - Total 8 marks a) A corn planter plans to sell all his corn on the futures market in August 2021, based on the spot prices at that time. The estimated sale is 100,000 pounds. The current spot price is $ 5,600 for a lot of 100,000 pounds. A futures contract for August 2021, is available for a price of $1200 per contract. The contract size is 100,000 pounds. If the rancher hedges his exposure through the futures contract, how many contracts will he need? What price will he effectively receive if the spot price in March is $0.0550 per pound? What if the spot price in March is $0.0590 per pound? Assume he is able to sell all 100,000 pounds. (4 marks) b) a If the following FOREX quotes are observed, compute the cross rate in the format NZ$/C$ and indicate which of the two currencies is undervalued and which one is overvalued? Does it result in profit making opportunity? What do you call this profit? What will be the profit if you have US$2.2 million to start with? (4 marks) US$ 0.93 / C$ US$0.24/NZS NZ$4.01 / C$

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