Suppose that in the 5 days following a farmer?s sale of December wheat futures at a futures

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Suppose that in the 5 days following a farmer?s sale of December wheat futures at a futures price of $5.51, the futures price is:

At the end of day 5, the farmer decides to quit wheat farming and buys back his futures contract. What payments are made between the farmer and the exchange on:

a. Day 1?

b. Day 2?

c. Day 3?

d. Day 4?

e. Day 5?

What is the total payment over the 5 days? Would the total payment be any different if the contract was not marked to market?

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Fundamentals of Corporate Finance

ISBN: 978-1260566093

10th edition

Authors: Richard Brealey, Stewart Myers, Alan Marcus

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Question Posted: Oct 25, 2019 07:38 AM

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Suppose that in the 5 days following a farmer?s sale of December wheat futures at a futures

Question:

3 Day Price 4 $5.51 $5.57 $5.38 $5.28 $5.18

Step by Step Answer:

The contract size is 5000 bushels so the farmer who sells a wheat fu...View the full answer

Fundamentals of Corporate Finance

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