In August a farmer will harvest 5000 tons of wheat. The current (May) cash price is $7/ton. The farmer wants to lock in this price, so he shorts an August contract at the price $8/ton. What will be the effective price for the famer if in August the cash price of wheat is $6/ton and the future price is $7.10/ton?

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In August a farmer will harvest 5000 tons of wheat. The current (May) cash price is $7/ton. The farmer wants to lock in
this price, so he shorts an August contract at the price $8/ton. What will be the effective price for the famer if in August
the cash price of wheat is $6/ton and the future price is $7.10/ton?
Transcribed Image Text:In August a farmer will harvest 5000 tons of wheat. The current (May) cash price is $7/ton. The farmer wants to lock in this price, so he shorts an August contract at the price $8/ton. What will be the effective price for the famer if in August the cash price of wheat is $6/ton and the future price is $7.10/ton?
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