Suppose that a farmer is concerned that the price of corn may decrease before the next...
Homework Answers
the financial instrument that can help the farmer in this case is a option contract. the way that these contracts work in reducing the risk is as follows:
the option contracts promises the farmer with a contract that allows him to sell his produce at a given fixed price, even if the market price is below that fixed price. in this way the farmer is secured from the market risk. in case the prices increase on the contrary, the farmer is not obliged to sell his produce at the fixed price. he can sell at the market price to get the higher gains
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Suppose that a farmer is concerned that the price of corn may
decrease before the next...
7. Suppose an increase in the world price of corn is sustained throughout a long time...
7. Suppose an increase in the world price of corn is sustained throughout a long time period. The supply of corn over time will likely, a. become more elastic because consumers have more choices over longer time horizons. b. become more elastic because it takes corn a relatively long amount of time to mature from planting to harvest. c. become less elastic (more inelastic) because consumers have fewer choices over longer time horizons. d. become less elastic (more inelastic) because...
Suppose you purchase the May 2017 call option on corn futures with a strike price of...
Suppose you purchase the May 2017 call option on corn futures with a strike price of $3.85. Assume you purchased the option at the last price if the day. Use Table 23.2 a. How much does your option cost per bushel of corn? (Do not round intermediate calculations and round your answer to 5 decimal places, e.g., 32.16161.) b. What is the total cost? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) c....
Suppose you purchase the May 2017 call option on corn futures with a strike price of...
Suppose you purchase the May 2017 call option on corn futures with a strike price of $3.70. Assume you purchased the option at the last price of the day. Use Table 23.2 a. How much does your option cost per bushel of corn? (Do not round intermediate calculations and round your answer to 5 decimal places, e.g., 32.16161.) b. What is the total cost of your position? Assume each contract is for 5,000 bushels. (Do not round intermediate calculations and...
Suppose you purchase the May 2017 put option on corn futures with a strike price of...
Suppose you purchase the May 2017 put option
on corn futures with a strike price of $3.60. Assume your purchase
was at the last price. Use Table 23.2 a. How much does your option
cost per bushel of corn? (Round your answer to 5 decimal places,
e.g., 32.16161.) b. What is the total cost for one contract? Assume
each contract is for 5,000 bushels. (Do not round intermediate
calculations and round your answer to 2 decimal places, e.g.,
32.16.) c....
4.The article mentions that when prices are low, farmers may have an incentive to plant additional...
4.The article mentions that when prices are low, farmers may have an incentive to plant additional acres. Explain why this does or does not conform with the principle of marginal analysis. Feel free to use an example of how a farmer may choose whether or not to plant an additional acre of corn to explain your answer. (2 points) 5.Using a supply and demand diagram, illustrate and explain how we might expect equilibrium price and quantity for corn to change...
Assume it is May 2018. A company expects to receive a cash payment of £10 million...
Assume it is May 2018. A company expects to receive a cash payment of £10 million in 7 months’ time from a customer. The company will not have immediate use of the cash until March next year. During this idling period, the financial manager will deposit this amount of cash for three months to earn interest. The price for the December 3-month interest rate futures in May 2018 is 94. The financial manager is concerned the interest rate will fall...
80 The price of the consol is $ b. You are concerned that the interest rate may rise to 6 percent. Compute t...
80 The price of the consol is $ b. You are concerned that the interest rate may rise to 6 percent. Compute the percentage change in the price of the consol and the percentage change in the interest rate. Compare them. Instructions: Enter your response for dollar amounts rounded to the nearest penny (two decimal places ) and answers for percentages rounded to the nearest tenth (one decimal place). The new price of the consol would be $ 66.67 20...
Problem 23-03 Futures Options Quotes (L04] Suppose you purchase the May 2017 call option on corn...
Problem 23-03 Futures Options Quotes (L04] Suppose you purchase the May 2017 call option on corn futures with a strike price of $3.60. Assume you purchased the option at the last price of the day. Use Table 23.2 a. How much does your option cost per bushel of corn? (Do not round intermediate calculations and round your answer to 5 decimal places, e.g., 32.16161.) b. What is the total cost of your position? Assume each contract is for 5,000 bushels....
TSR Silding! 5. Consider a farmer who must sale an extensive pasture of 100 acres (the...
TSR Silding! 5. Consider a farmer who must sale an extensive pasture of 100 acres (the "Owner"). The pasture is currently covered by cedars and it is impossible to be sure of the productivity. The soil of the pasture is likely poor quality and can only support 10 cows, making it worth $50,000. But there is a 20 percent chance that it is high quality, meaning it can support 40 cows with a value of $200,000 a. After the pasture...
7. Suppose an increase in the world price of corn is sustained throughout a long time period. The supply of corn over time will likely, a. become more elastic because consumers have more choices over longer time horizons. b. become more elastic because it takes corn a relatively long amount of time to mature from planting to harvest. c. become less elastic (more inelastic) because consumers have fewer choices over longer time horizons. d. become less elastic (more inelastic) because...
Suppose you purchase the May 2017 call option on corn futures with a strike price of $3.85. Assume you purchased the option at the last price if the day. Use Table 23.2 a. How much does your option cost per bushel of corn? (Do not round intermediate calculations and round your answer to 5 decimal places, e.g., 32.16161.) b. What is the total cost? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) c....
Suppose you purchase the May 2017 call option on corn futures with a strike price of $3.70. Assume you purchased the option at the last price of the day. Use Table 23.2 a. How much does your option cost per bushel of corn? (Do not round intermediate calculations and round your answer to 5 decimal places, e.g., 32.16161.) b. What is the total cost of your position? Assume each contract is for 5,000 bushels. (Do not round intermediate calculations and...
Suppose you purchase the May 2017 put option
on corn futures with a strike price of $3.60. Assume your purchase
was at the last price. Use Table 23.2 a. How much does your option
cost per bushel of corn? (Round your answer to 5 decimal places,
e.g., 32.16161.) b. What is the total cost for one contract? Assume
each contract is for 5,000 bushels. (Do not round intermediate
calculations and round your answer to 2 decimal places, e.g.,
32.16.) c....
80 The price of the consol is $ b. You are concerned that the interest rate may rise to 6 percent. Compute the percentage change in the price of the consol and the percentage change in the interest rate. Compare them. Instructions: Enter your response for dollar amounts rounded to the nearest penny (two decimal places ) and answers for percentages rounded to the nearest tenth (one decimal place). The new price of the consol would be $ 66.67 20...
Problem 23-03 Futures Options Quotes (L04] Suppose you purchase the May 2017 call option on corn futures with a strike price of $3.60. Assume you purchased the option at the last price of the day. Use Table 23.2 a. How much does your option cost per bushel of corn? (Do not round intermediate calculations and round your answer to 5 decimal places, e.g., 32.16161.) b. What is the total cost of your position? Assume each contract is for 5,000 bushels....
TSR Silding! 5. Consider a farmer who must sale an extensive pasture of 100 acres (the "Owner"). The pasture is currently covered by cedars and it is impossible to be sure of the productivity. The soil of the pasture is likely poor quality and can only support 10 cows, making it worth $50,000. But there is a 20 percent chance that it is high quality, meaning it can support 40 cows with a value of $200,000 a. After the pasture...
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