Question

Suppose today is March 27, 2018, and your firm produces breakfast cereal and needs 85,000 bushels of corn in May 2018 for an upcoming promotion. You would like to lock in your costs today because you are concerned that corn prices might go up between now and May. Use Table 25.2 a. What is the total price are you locking in for the 85,000 bushels of corn based on the day's closing price? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) b. Suppose corn prices are $4.08 per bushel in May. What is the profit or loss on your futures position? (Enter your answer as a positive value. Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) a. Total cost b. Table 25.2 2 Futures Contracts Futures Contracts Quote, March 28, Sugar-World CICE-US)-112000bs;cnts por b SOURCE: The Wall Street 9775 3000500161 Cotton OCE-US)-50,000 lts.centsperb Gold ccMoo-100 troy oz.Sper troy ou 135930 1362 60 14540 134790 -1300 327 650 OrangeJuice(ICE-US)-15,000scontsporb Aug 1365.80 136820 13590 35410 -1300 9357 May Od 1371.00 1372.00 135 9.00 1360.10-1300 6301 July B詞ม&60 137D0 บม0190เทว Palladium NYM-50 troyo per troy Treasury BondsCRT)$100,000 pts 32ndsof 00% June 144-140 145-280 144-110 145-200 29.0 793,32 Platinum oYM-50troy oSper troy az Treasury Notes con scoooo.pes 32ncof 100% June 120-12Dinais 120.110120190 939 20 70-370 12,588 1403,490,478 Silver ccao-5000 troyoz.Spertroyo 16465 1651 0143 1913 June 114-015 114-145114-007 114-120 9.0 3364 5 2 Yr. Treasury Notes (CRTS200,000. pts 32nds of)00% March 106-177 106-187106-172 106-18 17 1L,641 June 106-077 106-1ע iD&-072206197 27182973 30 Day Federal Funds (C-$5,000000.100-daity ag Crude○l,ughtSweet onM> L000bbis.spertb. Dec19 5752 5811 5714 5767 5 133,839 NY Harbor ULSD ONYM)-42000gal perga Yr. Delkt Rate Swaps can $100,000 pts 32ms of 100% 0050 20224 004 5. IMnth Libor (OME-$3000.00a pesof100 Gasoline-NY RBOB ONYM-42000gal perga Apr 977200 977450 7200 97.7400 0200 303,879 une 976800 977400 97.6800 7.7300 0500 17m79 Natural Gas oNYNO-10,000 MMBtu.S per MMBtu Dec19 97.1350 97 235097.1300 97.2200 0800 2167,522 2795 236 040 130534 Japanese Yen (OMD-V12500000.Sper 100W (CMEHCAD100000 sper CAD May 374.00 36.00 3225 374.00 40422 British Pound(oM 62500er May 2275 2875 22550 226.00 50 4472 My 3650 2.50 25100 23350-175 L137 Soybeans (CBT) 5000bu.centsperbu May 102700 1032 101725 10150600352 e106 10674 589 10632-002838 Ju 1037.75 104200 10800 103025 62s 24429 Australian Dollar (OME AUD 300000 Sper AUD Swiss FrancIOMD CF125000 sperCHF 7680 76-0047 1390 May 376.70 37850 37150 37240 260 190,304 May 7677 9-1048 19 IAbns4 ▼ 31353158 꾜232560 16 31as 3 123,056 Mexican Peso(CME-MXN500000 $ par MXN 05361 0531-00016 17,35 May 1242.00 1250.00 123950124450.110 5,034 Ane崂82253% 1348 Euro (CME-E125,000 Spar 4875 49.0055 223,995 ne12525 14 Mini DJIndustrialAverage (CBT-$5 xiIndkx -y _60525 6112S 599.75 601万-325 12612 Sept 2423124454 Cattle-Feeder (CME 50000bs.cents perib March 13.000 m5100 1350001苏眉 .500 3264 May 135550 137 875135425 136.350 80 19288 500 Index (CME-$250xIndx Mini S&P 500(M$50xndx Sept 2005.00 260.25 2soa75262025-4.25%206 Mini S&P Midcap 400(oME) $100x ndex Aprl 5&00) Sn5 ▼ 57525 9250-275 25, 619 Ame 1881.20 189240 194390 185190-23.70 29,a7 un 74150 74750 3725 4025 9790 Mini Nasdaq 100 (CMED-$20xinde une 67753 68493 649006513-212.322.729 800 507.00 05421 Spt 8145 6879 Mini Russell 2000 acE-US)$100xindo ne 1548.00 5500150910 110-230 9254 4245 une 1548.00 155700 2534 2554 -61 11037 US.Dollar Index (CE-US) SL000 x index

Answer 1

1.
Total cost=374/100*85000=317900

2.
One will long futures
Hence,
Profit on the futures position=(4.08-3.74)*85000=28900