3.

Hedging using futures

Suppose a farmer is expecting that her crop of oranges will be ready for

harvest and sale as 150,000 pounds of orange juice in 3

months time. Suppose each orange juice futures contract is for 15,000

pounds of orange juice, and the current futures price is F0=118.65 cents-per-pound.

Assuming that the farmer has enough cash liquidity to fund

any margin calls, what is the risk-free price that she can guarantee herself.

Please submit your answer in cents-per-pound rounded to two decimal places. So for example, if your answer is 123.456, then you should submit an answer of 123.47.