Top Posters
Since Sunday
w
3
w
3
e
3
3
r
3
g
2
2
b
2
M
2
V
2
f
2
c
2
This topic contains 1 attachment.
Home Q & A Board Other Fields Homework Help Business Finance
New Topic  
jag jag
wrote...
Go to Answer
Posts: 99
Rep: 0 0
3 years ago
Schwabl's restaurant uses wheat to bake its kummelweck buns. It requires 50,000 bushels in 2 months on July 10th. The spot price of wheat is $1.0525 per bushel and the July futures contract is trading for a price of $1.068/bu. Each contract is for 5,000 bushels. Assume Schwabl's enters the appropriate position in July wheat futures contracts to hedge its price risk. On July 10th it buys its wheat in the spot market at $1.071/bu and closes out the futures position. Unfortunately, the wheat futures price had not achieved convergence on the day the position was closed-the futures price was $1.07 when Schwabl's closed its position. What was the cost per bushel of wheat? The purchase cost includes the cumulative profit from the futures transactions.

▸ $1.0525/bu

▸ $1.0690/bu

▸ $1.0700/bu

▸ $1.0710/bu
Textbook 
Corporate Finance Online

Corporate Finance Online


Edition: 2nd
Authors:
Read 365 times
4 Replies
Replies
Answer verified by a subject expert
Hnin P.Hnin P.
wrote...
#1
Posts: 69
Rep: 0 0
3 years ago
Sign in or Sign up in seconds to unlock everything for free
More solutions for this book are available here
1

Related Topics

Anonymous
wrote...
#2
A year ago
Help! The answer is missing an explanation...
wrote...
#3
A year ago
Quote from: Anonymous (A year ago)
Help! The answer is missing an explanation...

Hi there,

I can't recall how to do this, since it has been many years since I wrote the answer. However, there is a similar example found in the document attached. Please let me know if it helps.
 Attached file 
(3834.55 KB)
You must login or register to gain access to this attachment.
wrote...
#4
3 months ago
Thanks
New Topic      
Quick Reply
Explore
Post your homework questions and get free online help from our incredible volunteers
  1187 People Browsing
Start New Topic Take the Tour CoursesNew Study Tools Topics Trending Browse by Textbook
Live Chat
Related Images
  
 1226
  
 4519
  
 261
Your Opinion
Who will win the 2024 president election?
Votes: 119
Closes: November 4
Previous poll results: Do you trust social media networks with protecting your privacy?