A potato farmer expects to harvest 88,000 pounds of potatoes in exactly three months. The farmer is concerned about news from ldaho that potatoes will be in great supply during US harvest time and news from Ireland that there might be a shortage due to a new strain of a potato virus plaguing the fields. The farmer decided to use a futures contract to hedge but there are no potato futures contracts traded on any of the exchanges. The nearest contract is a corn futures contract which has a 0.85 correlation coefficient with potato prices. The standard amount of the corn contract is 5,000 pounds. The spot price of potatoes is $2.61 per pound and the corn futures contract is priced at $3.21 per pound. Corn standard deviation is 28% while potato standard deviation is 24%. A. Show the maturity date results of the hedge under following conditions: B Describe in detail the risks associated with this hedge. C. Explain how the farmer would change his risk management strategy if the correlation between potato