In this situation you plan to purchase $25000$ pounds of copper in $2$ months. Since you are concerned about

that the price of copper will rise before then you want to hedge its price, using a futures contract which

expires in $4$ months. Find a reasonable range for the effective hedge price of copper in $2$ months' time.

Financing rate for holding copper: $,5\mathrm{.}2\%($i$.$e$.0\mathrm{.}052)$

a$.$ What should the $4-$month futures price for copper? $($use Formula $1)$

b$.$ What should cash$-$futures basis be between the spot and

$4-$month futures price be as of now? $($use Formula $2)$

c$.$ Assume the spot price of copper actually does not change between

now and $2$ months hence $($so time to contract delivery is now $2$ months$),$ and

that the financing rate remains $5\mathrm{.}2\%.$ What should the basis between spot and

the futures price be then? $($Use Formula $2).$

Also what is a reasonable estimate for the effective hedged price of copper?

$($Use Formula $3)$

d$.$ Assume the spot price of copper increases to $$4\mathrm{.}000/$pound between

now and $2$ months hence, and that the financing rate remains $5\mathrm{.}2\%.$ What

should the basis between spot and the futures price be then? $($Use Formula $2).$

Also what is a reasonable estimate for the effective hedged price of copper?

$($Use Formula $3)$

e$.$ Now assume the spot price of copper decreases to $$\frac{3\mathrm{.}650}{?}$ pound between

now and $2$ months hence, and that the financing rate remains $5\mathrm{.}2\%.$ What

should the basis between spot and the futures price be then? $($Use Formula $2).$

Also what is a reasonable estimate for the effective hedged price of copper?

$($Use Formula $3)$

f$.$ In view of these calculations, what is a reasonable range to use to

estimate the effective hedged price of copper in $2$ months' time?