EBK FUNDAMENTALS OF CORPORATE FINANCE
9th Edition
ISBN: 9781260049237
Author: BREALEY
Publisher: MCGRAW HILL BOOK COMPANY
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Question
Chapter 24, Problem 16QP
a)
Summary Introduction
To compute: The amount of payment among farmer and exchange on day 1.
b)
Summary Introduction
To compute: The amount of payment among farmer and exchange on day 2.
c)
Summary Introduction
To compute: The amount of payment among farmer and exchange on day 3.
d)
Summary Introduction
To compute: The amount of payment among farmer and exchange on day 4.
e)
Summary Introduction
To compute: The amount of payment among farmer and exchange on day 5, total payment and whether the size of payment be different.
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10. A soybean farmer plans to sell a portion of their crop in October. To set up a short hedge, the
farmer purchases a put option with a strike price of 750/bu. at a premium of 30/bushel. In October,
the soybean cash price is 640/bu. and November soybean futures are trading at 655/bu. Fill in the
table given here to describe the actions this farmer will take in the cash & futures exchange to
hedge, the gain/loss the manufacturer will experience in these markets, and the net price that the
manufacturer will receive for soybeans.
Futures & Options Markets
Purchase a put option
Time Period
Spot Market
June
No action
Strike Price = 750/bu.
Premium 30/bu.
October
Gain/Loss
Net Price
A farmer sells futures contracts at a price of $6.70 per bushel on 10,000 bushels of corn. The spot price of corn is $6.55 at contract expiration. What is the farmer's profit on the futures contracts?
Look at the futures listings for the corn contract in Table 2.7.Suppose you buy one contract for September 2019 delivery. If the contract closes in September at a level of 4.36, what will your profit be? (Round your answer to 2 decimal places.)
Chapter 24 Solutions
EBK FUNDAMENTALS OF CORPORATE FINANCE
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