1. Rotary Appliances is planning to go public. As an underwriter briefly explain the process of IPO for this company by using a hypothetical scenario. You need to use fictitious numbers for authorized and paid up capital thus your commission and fees (7% commission). Make sure to include your strategy on pricing and how you will deal the oversubscription, retail investor discount and flipping shares on initial trading days.
2. You are the president of a big corn farmers cooperative. The harvesting season is in December and you are speculating that overharvesting of corn will reduce the market price of this grain. You are planning to take a short hedge position on corn futures contracts for December delivery. Today, the spot price of 1000 bushel corn is $560 and one December futures contract for 1000 bushel is valued at $540. By using hypothetical numbers and graphs, show the hedging result assuming your speculation is true. [This time both asset and futures moved in same direction]