Question 4 (6 points): Hedge January 20th: Miller needs to buy wheat in late April. Currently, the May wheat futures are trading at $6.67. The expected basis is -$0.30. • Does the miller have a long or short cash position? • Does the miller have a long or short futures position? ⚫ To hedge: The miller will April 30th What is the expected price?. • The miller must. (buy/sell) May wheat futures at $6.67/bu. (buy/sell) wheat locally in the cash market at $7.89/bu. • To offset their future position, they must $8.04/bu. • What is the actual basis?. • What is the realized price for the producer? 。 Method 1: о Method 2: о The hedge resulted in a realized price of (buy/sell) May futures at
Question 4 (6 points): Hedge January 20th: Miller needs to buy wheat in late April. Currently, the May wheat futures are trading at $6.67. The expected basis is -$0.30. • Does the miller have a long or short cash position? • Does the miller have a long or short futures position? ⚫ To hedge: The miller will April 30th What is the expected price?. • The miller must. (buy/sell) May wheat futures at $6.67/bu. (buy/sell) wheat locally in the cash market at $7.89/bu. • To offset their future position, they must $8.04/bu. • What is the actual basis?. • What is the realized price for the producer? 。 Method 1: о Method 2: о The hedge resulted in a realized price of (buy/sell) May futures at
Principles of Macroeconomics (MindTap Course List)
7th Edition
ISBN:9781285165912
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter14: The Basic Tools Of Finance
Section: Chapter Questions
Problem 5QCMC
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