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Economics of Hedging with Futures Great Lakes Distributors buys 100,000 bushels of soybean futures at 512.95 per bushel, to cover a commitment to deliver 100,000 bushels of soybeans to a custamer in co days at a price of $13.25 per bushel. No margin deposit is required. Spot and futures prices for soybeans are equal and fluctuate between s12.50 and s13.40 per beishel. On the day of delivery to the customer, Great Lakes closes its futures position and buys soybeans in the spot market to fulfill its agreement with the curstomer. Requied a. Cilculate the cost per bushel to Great Lakes if the spot price at the time of purchase is $12.50. per bushel Calculate the cost per bushel if the spot price is $13.40; per bushel b. Prepare the entries Great Lakes makes to record the above events if the spot price is $13.20 per bushel on the day the futures contract. is closed. Great Lakes buys thi soybeans on the spot market, and delivers them to the customer. The futures position qualifies as a falt value hedge of the firm commitment to sell soybeans to the customer, Great Lakes records income effects of these transactions in cost of goods sold. b. Prepare the entries Great Lakes makes to record the above events if the spot price is s13 20 per bushel on the day the futures contract is clated Great Lakn buys the soybeans on the spot market, and delivers them to the customer. The fufures postion pualifies as a fair walue hedge of the firm commument to seil wybeant to the customer. Great Lahes records income effects of these transactions in cost of goods sold

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