Question
Suppose today is January 8, 2015, and your firm produces breakfast cereal and needs 105,000 bushels of corn in March 2015 for an upcoming promotion.
Suppose today is January 8, 2015, and your firm produces breakfast cereal and needs 105,000 bushels of corn in March 2015 for an upcoming promotion. You would like to lock in your costs today because you are concerned that corn prices might rise between now and March. Use standardized normal distribution z table
| a. | What is the total price you are locking in for the 105,000 bushels of corn based on the day's closing price? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) |
| Total cost | $ |
| b. | Suppose corn prices are $4.12 per pound in March. What is the profit or loss on your futures position? (Enter your answer as a positive value. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) |
| (Click to select)ProfitLoss | $ |
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International Finance Putting Theory Into Practice
Authors: Piet Sercu
1st edition
069113667X, 978-0691136677
