24. Shelling Earth (SE) will hedge on its anticipated December purchase of 6,000,000 bushels of soybeans. The current spot price for soybeans is 884, contract size is 5,000 bushels and the initial margin is $4,725 per contract (maintenance margin in $3,500). The current January soybean futures price is 895. Suppose that in December when SE closes its futures position the basis is the same as it is currently. a. What will be SE's margin investment today? $5,670,000 b. What is the basis today? -11 C. The December spot price is 870. What is the January futures price in December? 881 d. What will be SE's profit/loss on its futures position? $840,000 loss e. What is SE's effective cost of soybeans? $8.84 f. Suppose instead that the spot price in December is 878 and that the basis in December is zero. What will be SE's profit (loss) on its futures position? What is SE's effective cost of soybeans? $1,020,000 loss; $8.95 g. Consider a third scenario - the spot price in December is 878 and the January futures price in December is 884. What is the basis in December? What is SE's profit (loss) on its futures position? What is SE's effective cost of soybeans? -6; $660,000 loss; $8.89 h. In each of these scenarios, SE makes a loss on its futures position, which increases the effective cost it pays for its soybeans. What would the futures price have to be for SE to make a profit on its futures position? Greater than 895