Jack Straw grows corn on a 2,000-acre farm. It is late May and Jack has just finished planting. His typical yield is 110 bushels per acre, so he expects to harvest 220,000 bushels of corn in the fall. Corn futures contracts trade on the CME. The corn contract calls for the delivery of 5,000 bushels of corn. The contract is priced in cents per bushel. Complete parts a and b below.

a. To hedge his price risk, should Jack take a long or short position in the corn futures contract?

A. Long

B. Short

Assume that Jack enters the appropriate futures position (in the December contract) to hedge his price risk at a futures price of $7.3125/bu. In the fall, Jacks sells his harvest of 220,000

bushels to his local grain elevator, who pays him the prevailing spot price of $7.2850/bu.

Simultaneously, Jack executes an offset trade in the futures market. Assume that, due to convergence, the futures price on that date is equal to the spot price. What is Jack's cumulative profit from the futures transaction and what are his proceeds from selling his corn? The total proceeds include the profit (or loss) from the futures transactions. (Assume that you can trade a fractional number of contracts.)

Jack's cumulative profit from the futures transaction is

(Type an integer or a decimal.)

Jack's total proceeds from selling his corn are

$ .

(Type an integer or a decimal.)