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An agriculturer hedged 20,000 bushels of wheat using September 2017 futures based on the 5/18/17 settle price of 4.1425 per bushel. The wheat was planted in May and was harvested in September. The 5/18/17 cash price for corn was 4.0850. Assume that on 9/8/17, the farmer sold 22,000 bushels of corn in the cash market at 4.2725 and closed out the futures contracts at 4.2875. Show all work for full credit.

a. Ignoring commissions, what price per bushel did he actually receive for the wheat?

b. Assume that the person above is a speculator, not a hedger and that he enters the same futures transaction as above. Using a margin of $2000 per contract (5,000 bushels), calculate the price per bushel that he would have to close out the futures contracts at to earn a rate of return of exactly 70%. Calculate the price to the nearest 1/100th of a penny per bushel, even though corn futures only trade in 25/100th's of a penny. Ignore commissions.

c. Recalculate Part b. with commissions $10 per contract, round-trip (includes to both enter and exit the position). Calculate the price to the nearest 1/100th of a penny per bushel, even though wheat futures only trade in 25/100thrs of a penny.

d. Referring to Part b. above and ignoring commissions, at what price per bushel would the speculator receive a margin call if the maintenance margin is $1,500 per corn contract? Assume that the speculator starts with $12,000 in his account.

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