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On the 18' of August 2021, Farmer Steyn plants his crop of wheat and is concerned about the price he will receive when the crop

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On the 18'\" of August 2021, Farmer Steyn plants his crop of wheat and is concerned about the price he will receive when the crop is harvested on the 30'11 of September 202]. The premium for the option is R15 per contract; the strike price is R395 and the current ltures price is R395. The continuously compounded interest rate is 5% per annum. Assume that there are 252 trading days per year. What is his main concern? How can he hedge with futures? How can he hedge with options? Compare the two hedging strategies by completing this table: Derivative used: Futures Contract European Option Initial Cost Calculate the profit/loss on the stated dates for each derivative strategy (SHOW ALL YOUR CALCULATIONS): Wheat spot price Futures Contract European Option 25 August spot price of wheat=R320 31 August spot price of wheat=R380 17 September spot price of wheat = R440 30 September spot price of wheat = R500 SHOW ALL YOUR CALCULATIONS. e) On the same set of axes draw the graphs showing the prots from these two derivative strategies

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