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Show the hedging benefits as measured by effective price

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Question - Mr Nicolas Darrel  is the finance director of Sime Darby Plantation Berhad. He predicts that prices of palm oil to fall steadily between August and November. In early August, the company projects to produce 3,775 tonnes of palm oil by November and observes that the palm oil is trading currently at RM1,295 in the cash market while November futures is quoting at RM1,185. As expected in November, palm oil prices dropped to RM1,135 and RM1,025 in the cash and futures markets, respectively. Show the hedging benefits as measured by effective price.

Reference no: EM133106705

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