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The current spot price of wheat is $4.95 per bushel. Expecting the wheat price to increase next quarter, Kelloggs takes a long position on June
The current spot price of wheat is $4.95 per bushel. Expecting the wheat price to increase next quarter, Kelloggs takes a long position on June futures contracts at $5.35 per bushel of wheat in March. At maturity, the company purchased 10,000 bushels of wheat at the spot price of $5.00. Ignoring the transaction costs, Kelloggs long position on the wheat futures contract can lock the wheat price in the effective price of _____________?
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