1) In six months, a cereal company plans to sell 50,000 boxes of Corn Crisps for $3.50 per box and will need to buy 25,000 bushels of corn to do so. In doing so, it also incurs non-corn costs of $43,000. The current spot price of corn is $4.90 per bushel, and the six-month forward price is $5.15. Assuming the company remains unhedged, what total profit would it earn if the market price of corn in six months is $4.30, $4.70, $5.10, and $5.50, respectively?

a) $24,500; $14,500; $4,500; $5,500

b) $3,250; $3,250; $3,250; $3,250

c) $5,338; $4,663; $7,163; $7,163

d) $31,163; $31,163; $23,663; $13,663

e) $8,463; $8,463; $1,538; $1,538

2) In six months, a cereal company plans to sell 10,000 boxes of Corn Crisps for $3.50 per box and will need to buy 5,000 bushels of corn to do so. In doing so, it also incurs non-corn costs of $8,000. The current spot price of corn is $4.90 per bushel, and the six-month forward price is $5.19. The company will hedge by buying corn forward. What total profit would be earned if the market price of corn in six months is $4.30, $4.70, $5.10, and $5.50, respectively?

a) $1,050; $1,050; $1,050; $1,050

b) $5,945; $5,945; $4,945; $2,945

c) $2,055; $55; $945; $945

d) $2,122; $2,122; $122; $122

e) $5,500; $3,500; $1,500; $500

3) In six months, a cereal company plans to sell 10,000 boxes of Corn Crisps for $2.00 per box and will need to buy 5,000 bushels of corn to do so. In doing so, it also incurs non-corn costs of $1,000. The current spot price of corn is $3.50 per bushel, and the effective six-month interest rate is 6 percent. The company will hedge by purchasing call options at $0.47 with a strike price of $3.50 per bushel. What total profit would the company earn if the market price of corn in six months is $2.90, $3.30, $3.70, and $4.10, respectively?

a) $2,009; $9; $991; $991

b) $3,991; $3,991; $2,991; $991

c) $4,500; $2,500; $500; $1,500

d) $450; $450; $450; $450

e) $1,546; $1,546; $454; $454

4) In six months, a cereal company plans to sell 40,000 boxes of Corn Crisps for $4.50 per box and will need to buy 20,000 bushels of corn to do so. In doing so, it also incurs non-corn costs of $83,000. The current spot price of corn is $4.50 per bushel, and the effective six-month interest rate is 5 percent. The company will hedge by selling a collar -- i.e., purchasing $4.70-strike call options at $0.47 per bushel and writing $4.30-strike put options at $0.27. What total profit would be earned if the market price of corn in six months is $3.90, $4.30, $4.70, and $5.10, respectively?

a) $2,400; $2,400; $2,400; $2,400

b) $7,240; $760; $4,760; $4,760

c) $19,000; $11,000; $3,000; $5,000

d) $18,760; $18,760; $14,760; $6,760

e) $6,800; $6,800; $1,200; $1,200