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Homework answers / question archive / Company Z wishes to hedge its exposure to cotton with corn futures over the next three months
Company Z wishes to hedge its exposure to cotton with corn futures over the next three months. The market price of cotton per ton and future price of corn per ton for 8 months are given. The company has an exposure to the price of 1000 tons of the cotton. Each futures contract is on 42 tons of corn. How many corn contracts should be traded? (Answer is rounded)
| Month | Corn future price per ton | Cotton price per ton |
| 1 | 175 | 1770 |
| 2 | 165 | 1776 |
| 3 | 172 | 1788 |
| 4 | 182 | 1791 |
| 5 | 177 | 1789 |
| 6 | 189 | 1885 |
| 7 | 179 | 1902 |
| 8 | 184 | 1910 |
Which answer:
A . 88
B. 133
C. 41
D. 24
E. 48
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