Answer: The average price paid for the commodity is $102.20
We follow these steps to arrive at the answer:
The company needs 1200 units in one year's time
It has hedged 70% of its requirement at a futures price of $95 per unit.
So, after one year, the company will buy
at $95 per unit.
It still needs
to meet its requirements. So, it will buy 360 units at the spot price prevailing after one year, i.e. $119.
We find the average price paid as follows:



