It is? April, and Hans Anderson is planting his barley crop near? Plunkett, Saskatchewan. He is concerned about losing his farm if his operations result in a loss at the end of the season. He expects to harvest 3 comma 000 tonnes of barley and sell it in October. Futures contracts are available for October delivery with a futures price of $ 200 per tonne. Options with strike price of $ 200 per tonne are also? available; puts cost $ 16 and calls cost $ 20.

a.Describe how Hans can fully hedge using futures contracts, from choices below:

A.Hans can take a short position in futures on 3000 tonnes of barley for delivery in October.

B.Hans can take a long position in futures on 3000 tonnes of barley for delivery in October.

C.Hans can take an intermediate position in futures on 3000 tonnes of barley for delivery in October.

D.Hans can wait until prices rise in the future.

b. Given the strategy in (a?), what will be the total net amount received by Hans? (for all 3000 ?tonnes) if the price of barley in October is as? follows:

i .$ 150 per? tonne;

ii. $200 per? tonne;

iii. $250 per tonne

c.Describe how Hans can fully hedge using options.

d. Given the strategy in ?(c?), what will be the total net amount received by Hans? (for all? 3,000 tonnes) if the price of barley in October is as? follows:

i. $150 per? tonne; ii. $200 per? tonne; iii. $250 per tonne

e. Hans has asked for your advice regarding hedging. Discuss how the each of the following individually will influence your advice.

i. Hans does not expect to have much cash available between May and September.

ii. Hans thinks there is a 20?% chance his crop will be destroyed by hail before he has a chance to harvest it.

iii.? Hans's farming business will go bankrupt if his net revenues in October do not cover his costs. He estimates his costs will be $600,000. If his business goes? bankrupt, Hans's bank will foreclose and take his house and farm.

iv.? Hans's farming business will go bankrupt if his net revenues in October do not cover his costs. He estimates his costs will be $800,000. If his business goes? bankrupt, Hans's bank will foreclose and take his house and farm.