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(Solved): The Universal Inonu Corporation anticipates the need to purchase 80,000 bushels of whe five months t ...



The Universal Inonu Corporation anticipates the need to purchase 80,000 bushels of whe five months to use in their products. The current cash price for wheat is 56.70 a bushel. A five-month futures contract for wheat can be purchased at 57:25. (20 points) c. Explain why Universal inonu Corporation might need to purchase futures contracts to hedge their position. d. To completely hedge their exposure, how many contracts will they need to purchase? Wheat trade in 5,000-bushel contracts e. If the cash price of wheat ends up at $7.95 per bushel after six months, by how much will the actual cost of 80,000 bushels of wheat have gone up? f. After the futures contracts are closed out (sold at $7.95 also), what will be the gan on the futures contracts? g. Considering the answers to parts c and d, what is their net position?



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