Author Question: Today is January 1st. You are a soybean farmer that wants to hedge the price of your current crop. ... (Read 126 times)

Engineer · **on:** Apr 25, 2021

Today is January 1st. You are a soybean farmer that wants to hedge the price of your current crop. Soybean futures contracts trade on the CME, and call for the delivery of 5,000 bushels of soybeans. Your soybeans will be ready for market in September, and you expect to harvest 75,000 bushels. Assume you enter the appropriate futures position to hedge your price risk at a futures price of $7.70/bu. In the fall you sell your soybeans locally at the current spot price of $7.4275, and also execute an offset trade. Due to convergence, the futures price is equal to the prevailing spot price. What are your total proceeds from selling your soybeans? Total proceeds include the profits (loss) from the futures transactions.
◦ $536,625
◦ $558,425
◦ $577,500
◦ $595,375

ashely1112 · **Reply #1 on:** Apr 25, 2021

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