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krek1111 [17]
3 years ago
14

Farmer Brown grows Number 1 red corn and would like to hedge the value of the coming harvest. However, the futures contract is t

raded on the Number 2 yellow grade of corn. Suppose that yellow corn typically sells for 95% of the price of red corn. If he grows 156,750 bushels, and each futures contract calls for delivery of 5,000 bushels, how many contracts should Farmer Brown buy or sell to hedge his position?
Business
1 answer:
Ne4ueva [31]3 years ago
6 0

Answer:

Sell 33 contracts

Explanation:

According to the scenario, computation of the given data are as follows:

Price of yellow corn = 95% of red corn

Bushels grows = 156,750

So, yellow corn bushels = 156,750 × (1 ÷ 95%)

= 165,000

So, number of contracts sell = 165,000 ÷ 5,000

= 33 contracts.

Hence, the farmer Brown should sell 33 contracts to hedge his position.

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3 years ago
Finch Company began its operations on March 31 of the current year. Finch has the following projected costs: April May June Manu
faust18 [17]

Answer:

$187,975

Explanation:

Calculation to determine The cash payments expected for Finch Company in the month of April

Cash Payment= 3/4 *$198,500 (May's manufacturing cost)+1/4 *$156,400 (April's manufacturing cost received in May)

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6 0
3 years ago
Determine the capitalized cost of a permanent roadside historical marker that has a first cost of $75,000 and a maintenance cost
densk [106]

Answer:

The capitalized cost is $ 84,667.20

Explanation:

First of all please note that the cost of $ 75,000 is already the present cost.

The cost of $3200 which occurs every 3 years can be converted into a value using factor A/F for one life cycle.

The capitalized cost then can be calculated as follows :

CC = $ 75,000 + $ 3200(A/F, 10%, 3 years)/interest

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6 0
3 years ago
Miller owns a personal residence witha fair market value of $308,000 and an outstanding first mortgage of $246,400. Miller gets
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Based on the information given above, the on the $246,400 of the first and second mortgage is treated as qualified residence indebtedness.

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