Refer to Practice 19-3 and complete the following:

1. Compute the total amount (including all forward-related cash flows) that the golf course developer will pay to buy 5,000 trees in Year 2, assuming that the price of a tree on January 1 of Year 2 is (a) $250, (b) $600, and (c) $400. Comment on your computations.

2. When the financial institution entered into the tree forward contract on January 1 of Year 1, which direction did the financial institution think that tree prices were going to go—up or down? Explain.