QUESTION $2$

$3$ points

Consider a situation where you plan to trade a long$-$the$-$basis position with these criteria:

You plan to buy wheat during June at a basis of $-40$ JUL.

You expect to sell wheat during October at $+15$ DEC.

The wheat will be held approximately four months resulting in a total cost$-$of$-$carry. of $20$ c$/$bushel$.$

The only component not locked in is the spread. Calculate the outcome of the basis transaction in three different circumstances, each using the same criteria as shown above, but with these three different spread possibilities:

If you set a pre$-$spread from JUL to DEC at a $15$larr carry, what would your net margin be$?$

If you set a pre$-$spread from JUL to DEC at a $20$ carry, what would your net margin be$?+\mathrm{.}15vv$

If you set a pre$-$spread from JUL to DEC at a $12$ inversion, what would your net margin be$?$

QUESTION $3$

$3$ points

Consider a situation where you plan to trade a long$-$the$-$basis soybean position with these criteria:

You plan to buy soybeans during November at a basis of $-25$JAN.

You expect to sell soybeans during January at $+10$ MARCH.

The soybeans will be held approximately two months at a total cost$-$of$-$carry of $20.$

The only component not locked in is the spread. Calculate the outcome of the basis transaction in three different circumstance s$,$ each using the same criteria as shown above, but with these three different spread possibilities:

If you set the pre$-$spread from JAN to MARCH at a $15$ carry, what would your net margin be$?$

If you set the pre$-$spread from JAN to MARCH at a $25$ carry, what would your net margin be$?$

If you set the pre$-$spread from JAN to MARCH at a $30$ c inversion, what would your net margin be$?$