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Can someone answer these questions using excel? Question 5a (Hedging). Ktusty Burger requires pork for producing its famous Meat-Flavored Sandwich. Frozen Pork Bellies futures contracts
Can someone answer these questions using excel?
Question 5a (Hedging). Ktusty Burger requires pork for producing its famous Meat-Flavored Sandwich. Frozen Pork Bellies futures contracts trade on the CME. Each contract calls for the delivery of 40,000 lbs. of USDA-inspected Pork Bellies. Katusty requires 40,0001 ss on July 10 . Today the spot price of pork bellies is $1.1770 per pound and the July futures contract is trading for a price of $1.2055/bs. Assume Kollsty enters the appropriate position in July futures contracts to hedge its price risk. On July 10 th it buys its pork from local pig farmers at $1.1655/lb and closes out the futures position. Unfortunately, the pork bellies futures price had not achieved convergence on the day the position is closed-the futures price is $1.1700 when Ktusty Burger closes its position. What is the cost per pound of pork? Hint: The purchase cost includes the cumulative profit from the futures transactions. That is, purchase cost = purchase price at spot + profitloss from the futures trading A. $1.1255 B. $1.1655 C. $1.1770 D. $1.2010 Question 5b (Hedging). A restaurant uses wheat to bake its kummelweck buns. It requires 50,000 bushels in 2 months on July 10 th. The spot price of wheat is $1.0525 per bushel and the July futures contract is trading for a price of $1.068 bu. Each contract is for 5 , 000 bushels. Assume the restaurant enters the appropriate position in July wheat futures contracts to hedge its price risk. On July 10 th it buys its wheat in the spot market at $1.071 hut and closes out the futures position. Unfortunately, the wheat futures price had not achieved convergence on the day the position was closed-the futures price was $1.070 when the restaurant closed its position. What was the cost per bushel of wheat? The purchase cost includes the cumulative pro fit from the futures transactions. A. $1.0525kry B. $1.0690/ku C. $1.0700ku D. $1.0710/krStep by Step Solution
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