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Frm book 3 problem 8.20


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Question 8.20: On January 15 of Year 1, a company decides to hedge the purchase of 100,000 bushels of corn on February 15 of Year 2. The following table gives futures prices (cents per bushel) of three selected contracts on four different dates. Explain how the company can use the contracts to create the required hedge. What is the net (after hedging) price paid for the corn as a function of the spot price on February 15 of Year 2? Each corn contract is on 5,000 bushels.



It want to hedge purchase -> afraid price going up -> to hedge, it need long future? Instead of short as in the answer.

Or did I miss anything here?

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