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What is the profit or loss on your futures position

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Question - Suppose today is March 28, 2018, and your firm produces breakfast cereal and needs 165,000 bushels of wheat in July 2018 for an upcoming promotion. You would like to lock in your costs today because you are concerned that wheat prices might go up between now and July. You are looking at wheat futures contracts traded on the MPLS.

Required -

a-1. How many wheat futures contracts would you purchase or sell to hedge your risk exposure?

a-2. What total price would you effectively be locking in based on the closing price of the day?

b-1. Suppose wheat prices are $6.25 per bushel in July 2018. What is the profit or loss on your futures position?

Reference no: EM133157427

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