Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

in six months, a cereal company plans to sell 40,000 boxes of wheat crips for 3.50 per box and will need to buy 20,000 bushels

in six months, a cereal company plans to sell 40,000 boxes of "wheat crips" for 3.50 per box and will need to buy 20,000 bushels of wheat to do so. In doing so, it also incurs non-wheat costs of $6,000 the current spot price of wheat is $6.30 per bushel, and the six month forward price is $6.49. the company will hedge by buying wheat forward. what total profit would be earned if the market price of wheat in six months is $5.70, $6.50, and $6.90 respectively?

A.$4,200;$4,200;$4,200;$4,200

B.$25,716;$25,716;$25,715;$13,716

c.$20,000;$12,000;$4,000;$$-4,000

d.$8,086;$8,086;$$86;$86

e.$2,284;$-5,716;$-9,716;$-9,716

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Personal Finance Tax Update

Authors: E. Thomas Garman , Raymond Forgue

13th Edition

0357438949,0357438930

More Books

Students also viewed these Finance questions