3. Suppose you are a distributor of canola seed and you observe the spot price of canola to be $7.45 per bushel while the futures price for delivery one month from today is $7.60. Assuming a $0.10 per bushel carrying cost, what would you do to hedge your price uncertainty? (2 pts.)

4. A stock has a spot price of $100; the riskless interest rate is 7% per year (compounded annually), and the expected dividend on the stock is $3, to be received a year from now. (2 pts.)

a. What should be the one-year futures price?

b. If the futures price is $1 higher than your answer to part a), what might that imply about the expected dividend?