On May 1^st of the current year Willie the Wheat Processor projects his level of wheat necessary to satisfy his production runs beginning in September of that same year. Willie is concerned that the market price of wheat may move against him over this 4 month period. Willie believes he will need 35,000 bushels of wheat and his broker informs him that the current futures price for contracts that meet his needs is $2.80 (based on standard 5,000 bushel contracts)). The broker also informs him that the initial margin requirement will be $2,800 per contract with a maintenance margin of $1,600 per contract. Based on this information, answer the following questions (YOU MUST SHOW ALL CALCULATIONS TO RECEIVE CREDIT):

1. Should Willie go long or short in wheat? Why?
2. How many contracts should Willie transact in?
3. How much is each contract worth at inception? How much must Willie remit to the broker (in total) at the time the futures contracts are purchased?
4. If after one month the futures price increases to increases to $3.00, what is the value of each contract? What will Freddie have to do per the terms of the futures contracts?
5. If one month later the futures price declines to $2.40, what is the value of each contract? What will Freddie have to do per the terms of the futures contracts?