25. Look at the futures listings for corn in Figure 2.11. (LO 2-3) a. Suppose you buy one contract for December 2015 delivery. If the contract closes in December at a price of $3.95 per bushel, what will be your profit or loss? (Each contract calls for delivery of 5,000 bushels.) b. How many December 2015 maturity contracts are outstanding?

2.1 The bid price of the bond is 108.8906% of par, or $1,088.906. The asked price is 108.9375 or $1089.375. This asked price corresponds to a yield of 1.880%. The ask price increased .0938 from its level yesterday, so the ask price then must have been 108.8437, or $1,088.437.

2.2 A 6% taxable return is equivalent to an after-tax return of 6(1 - .28) = 4.32%. Therefore, you would be better off in the taxable bond. The equivalent taxable yield of the tax-free bond is 4/(1 - .28) = 5.55%. So a taxable bond would have to pay a 5.55% yield to provide the same after-tax return as a tax-free bond offering a 4% yield.

Corn futures prices in the Chicago Board of Trade, September 17, 2014 Source: Data from The Wall Sired Journal Online, September 17, 2014. Note: Numbers after apostrophes denote eighths of a cent