General Foods buys wheat on the cash market for its many cereal products. In January, the cash price is $2.50 per bushel. The April futures contract is trading at $3.00 per bushel (answer all 5 parts).

a. To hedge against price risk does the firm go long or short in the futures market for wheat?

b. In April the cash price is $3.00 per bushel, while the April futures price is $3.50 as well. Did General Foods have a loss or gain per bushel in the cash market?

c. What was it?

d. Did General Foods have a loss or gain per bushel in the futures market?

e. What was it?