18. A cereal manufacturer wants to maintain costs on future deliveries of 107, 500 bushels of wheat at 567.4 cents per bushel. They notice that the hedge ratio is very close to 1, so they enter into 5,000 short contracts for October delivery at 568.1 cents per bushel, another 5,000 contracts for December delivery at 569.0 cents per bushel, another 5,000 contracts for February delivery at 570.5 cents per bushel, and, finally, for April delivery the same number of contracts at 571.4 cents per bushel. The company closes out contracts as the last trade date approaches. Holdings Price at Sell-to-Open Price at Buy-to-Close Wheat Holdings 107,500 bu long 567.4c/bu 586.4c/bu October wheat 5,000 contracts 568.1c/bu 569.5c/bu December wheat 5,000 contracts 569.0c/bu 570.8c/bu February wheat 5,000 contracts 570.5c/bu 580.5c/bu April wheat 5,000 contracts 571.4c/bu 586.4c/bu What was the cost(gain) of this hedge to the company? 19. You are a candy manufacturer, specializing in chocolate toffee (yum!). You have just received an order which requires the purchase of 13 tons of cocoa over six months. Relevant contract specs for cocoa are: Close Price/ton Number of Contract size Tie Size Tic Value Contracts Spot US$2668 Dec 20 US$2641 10 tons S1/ton US$10.00 Mar 21 US$2623 3 10 tons S1/ton US$10.00 May'21 US$2611 3 10 tons $1/ton US$10.00 Jul 21 US$2602 Si/ton US$10.00 4 10 tons