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Poppy Popcorn is a company that produces popcorn balls for Halloween The company has determined that its profits per bushel of corn is given by the question:

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P(X) = 2000 – 5X, where X is the price of corn per bushel six months from today

To hedge against the prospect of higher corn prices, the company purchases 5 call options on corn with a strike price of $375 and a cost of $014703 (all dollar values are per bushel). The annual continuously compounded risk-free rate is 4%.

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a) Calculate the company’s after hedge profits per bushel of corn if the actual price of corn in six months is $350 per bushel.

b) Calculate the company’s after hedge profits per bushel of corn if the actual price of corn in six months is $400 per bushel. Get Finance Help Today

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