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Risk-free price that she can guarantee herself

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Hedging using futures

Suppose a farmer is expecting that her crop of oranges will be ready for harvest and sale as 150,000 pounds of orange juice in 3 months time. Suppose each orange juice futures contract is for 15,000 pounds of orange juice, and the current futures price is F0=118.65 cents-per-pound. Assuming that the farmer has enough cash liquidity to fund any margin calls, what is the risk-free price that she can guarantee herself?

Reference no: EM131199101

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