Find forward contract to hedge against changes

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Consider a trader who borrows $206,000 to purchase 100,000 bushels of corn at the price of $2.06 per bushel. The corn is stored for use in 3 months time. Storage and insurance charges of $200 are paid at the beginning of each month. These charges are also financed by borrowing. Interest expenses are 10% per year continuously compounded. A trader wishes to enter a forward contract to hedge against changes in the price of corn. What should be the no-arbitrage price of this contract?

Reference no: EM133069980

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