For the whole assignment you can assume the following market data: US risk-free rate: RUS) = 1.5% p.a. Canadian risk-free rate: RCA) = 2.2% pa. All interest rates are given with continuous compounding. Problem 1 (10 points) Suppose you want to hedge the purchase of 11000 metric tons of soybeans on May 10, 2021. Futures contracts for soybeans (Ticker: ZS) are traded on the CME. (a) (1 point) What is your trading strategy? Now assume you entered the contract chosen above at a price of 528. (b) (2 points) What is the gain/loss from hedging, if you close out the contract at a price of 522? (c) (4 points) Assuming the basis will be between -20 and 20 when you close out your contract, what is your minimum total cost of purchasing the soybeans (including hedging profits/losses) Graphit the total cost as a function of the value of the basis Batay- (d) 3 points) Was the hedge successful, if the basis at the time of the sale is +3? Explain The Big Basketball Company (BBC) earned $10 a share last year and paid a dividend of $5 a share. Next year, you expect BBC to earn $12 and continue its payout ratio. Assume that you expect to sell the stock for $132 a year from now. If you require 10% on this stock, how much would you be willing to pay for it? $125.45 $124.54 $130.91 $123.75