Question
Determine the gain/loss for the company below, on its purchase in June and its futures hedge: Date today:January 1 Date and amount of proposed future
Determine the gain/loss for the company below, on its purchase in June and its futures hedge:
Date today:January 1
Date and amount of proposed future purchase of wheat:June 1 purchase of 1,000 bushels
Spot prices:January 1 spot price is $45 per bushel, assume June 1 spot price will be $50 per bushel
July futures contract prices: On January 1 the July futures contract price is $48 per bushel, assume on June 1 the July futures contract price will be $53 per bushel
Wheat contracts are for 1,000 bushels, which is the size of the hedge.Assume initial margins of 5% and broker loans at 7%.
Determine the gain/loss for the company below, on its purchase in June and its futures hedge:
Group of answer choices
A. $4,930 loss (negative)
B. $70 loss (negative)
C. $430 gain (positive)
D. $1,470 gain (positive)
If possible show work in excel please
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