Finance
posted by Tee .
Farmer Tom Hedges anticipates taking 100,000 bushels of oats to the market in three months. The current cash price for oats is $2.15. He can sell a three month futures contract for oats at $2.20. He decides to sell 10 5,000bushel futures contracts at that price. Assume that in three months when Farmer Hedges takes the oats to market and also closes out the futures contracts (buys them back), the price of oats has tumbled to $2.03
a.What is his total loss in value over the three months on the actual oats he produced and took to market?
b.How much did his hedge in the futures market generate in gains?
c.What is the overall net loss considering the answer in part a and the partial
hedge in part b

a.total loss=($2.15$2.03)*100000=$12000
b.Hedge=($2.20$2.03)*50000=$8500
c.overall net loss=$12000$8500=$3500
Respond to this Question
Similar Questions

investmets
July oats are trading at $2.48, analysis says they will sell at $2.40 in a couple of months. what kind of return on capital will she make if she shorts 3 july oats contracts ( each contract covers 5,000 bushels of oats) by depositing … 
Business law questions? (multiple choice)?
Farmer J enters into a contract to sell 15,000 bushels of oats to ABC Mills. Flood destroys onehalf of his crop. Farmer J a. Is excused from performance od contract because of impossibility b. Is excused from perf of contract because … 
PreCalculus
I am having a lot of problems with this linear programming problem. CAn someone help? 
Math
A farmer buys two varieties of animal feed. Type A contains ounces of oats and ounces of corn per pound. Type B contains ounces of oats and ounces of corn per pound. The farmer wants to combine the two feeds so that the resulting mixture … 
Math
Oatmeal Recipe: Water 3/4 cup Salt: 1/4 teaspoon Oats: 1/3 cup If the least possible multiple of the recipe above is prepared so that a whole number of cups of both water and oats are used, how many teaspoons of salt would be required? 
math
a farmer sold 425 bushels of wheat and oats for $481.58. How many bushels of each did he sell, if he received $2.08 a bushel for the wheat and $.94 a bushel for the oats? 
Algebra
She has 1000 bushels of corn to sell. Presently the market price is $5.00 bushel. She expects market price to increase .15 a week. For each week she wants to sell,she loses 10 bushels to spoilage. Determine a function to express her … 
maths
Three bags of wheat,two bags of corn, and one bag of oats weigh the same as one bag of wheat,one bag of corn and five bags of oats,if two bags of corn and one bag of oats weights 25 pounds and one bags of corn weights 10 pounds,How … 
Math
a recipe for a banana oats muffins calls for 1/2 cup of old fashioned oats. you are making 3/4 of the recipe. how many cups of oats should you use? 
math
A farmer with 1200 acre is considering planting 3 different crops corn, soybeans, and oats. The farmer wants to use all 1200 acres. seed corn costs $20 per acre, while soybeans and oats costs $50 and $12 respectively. The farmer has …