Suppose a grain elevator in Iowa buys corn in cash market on April 19 and deliver on May 25 through cash market. Elevator buys two grades of corn. U.S. No.1 at $8.50/bushel and U.S No.2 at $7.80 bushel. Elevator has to store them for one month and may face cash price fluctuations until the product is sold. Cost of storage of U.S. No.1 corn from April 19 through May 25 is $0.10/bu and that of U.S. No.2 corn is $0.15/bu. On May 25 the cash market price of U.S. No.1 corn is $8.00/bushel and U.S. No.2 corn is $7.50/bushel. What is the elevator's total gain or loss of both U.S. No.1 and U.S. No.2 corn in cash market as of May 25? On April 19, elevator can sell corn in the futures market to hedge the cash market risk. U.S. No.1 corn is sold at $8.90/bushel and U.S. No.2 corn is sold at $8.30/bushel Calculate the Basis for U.S. No.1 corn and U.S. No.2 corn as of April 19 respectively. On May 25, U.S. No. 1 corn Basis narrowed to $0.30 and U.S. No.2 corn Basis widened to $0.65. If elevator decides to buy both futures contracts back as of May 25, what futures prices does the elevator buy U.S. No.1 corn and U.S. No.2 corn contracts at respectively? iv. What is the elevator's total gain or loss of both U.S. No.1 and U.S. No.2 corn in the futures market through this hedging as of May 25? v. What is the elevator's net profit or loss of both U.S. No. 1 and U.S. No.2 corn as of May 25 vi. Did the elevator make a good decision to do hedging simultaneously in both cash and futures markets? Explain why or why not