Use the LONGEST TIME FRAME contracts as reported in the paper for your calculations to Find out what the margins are and Show all the calculations for the hedges you use.

Use the Fri 4/24 WSJ that we looked at last night for your forward or futures prices. Assume that the forward contract prices would be the same as the futures prices. Even tho’ the assignment sheet says the contracts are for December, use the LONGEST TIME FRAME contracts as reported in the paper for your calculations (e.g., use the Sept contract or the July contract prices). Find out what the margins are, if you need them for your solutions (remember there are 2 margins). Show all the calculations for the hedges you use.

For Prob. 1, use a futures hedge. For # 2, assume your contract agent will charge you $1,000 for his help.

Warning: These problems take a little THINKING to solve. so be sure to spend some time trying to resolve them. When I look at your solutions next Tuesday, if you say “I couldn’t do them”, I will assume you really DIDN’T PUT TOO MUCH EFFORT INTO THEM ! ! If you need to, you can do a little research on Futures and Forwards for examples to see how they work.