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Suppose that in the 5 days following a farmers sale of September wheat futures at a futures price of $2.72 the futures prices are Day
Suppose that in the 5 days following a farmers sale of September wheat futures at a futures price of $2.72 the futures prices are | |||||
Day | 1 | 2 | 3 | 4 | 5 |
Price | $2.72 | $2.53 | $2.42 | $2.52 | $2.51 |
At the end of day 5 the farmer decides to quit wheat farming and buys back his futures contract. The contract size is 15,000 bushels. What payments are made between the farmer and the exchange on each day? What is the total payment over the five days? (Use minus sign to enter negative cash flows, if any. Do not leave any cell blank. Put zero wherever required.) |
Futures price | Cash flow per contract | ||||
Day 1 | $2.72 | $ | |||
Day 2 | $2.53 | $ | |||
Day 3 | $2.42 | $ | |||
Day 4 | $2.52 | $ | |||
Day 5 | $2.51 | $ | |||
Total: | $ | ||||
Would the total payment be any different if the contract was not marked to market? | |||||
No/Yes ? |
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