The following questions use the table below about a flour miller that will need wheat soon later this year.

NowLaterCash Wheat Market$5.00/bu $5.30/bu

Futures Wheat Market$4.75/bu$4.80/bu

1) Is the individual concerned about priceincreasingordecreasing?

2) What is the initial action in the futures market:buyorsell?

3) What is the cash price paid/received by the individual later?

4) Did the individual earn aprofitorlossin this hedging situation? Enterprofit or lossin the following blank.

5) What is the value (i.e. amount) of the profit/loss on the hedge for one contract (signs matter)?

6) The basis was initially $0.25 and ended up being _______________.

7) The hedged price in this example was not the current cash price due to the basis changing. What was the hedged price/net purchase price?

8) What was the expected cash price the individual would pay/receive when the hedge was initiated?

9) Due to the use of hedging, was the net purchase/selling priceincreasedordecreaseddue to the basis changing relative to what would have happened if the individual did not hedge?