Final answer:
To calculate gain or loss in the futures, subtract the initial futures price from the current price of $3.80 per bushel. The net price for the corn includes the cash price paid plus any loss or minus any gain from the futures hedge. Without the initial futures price, the specific gain or loss cannot be determined.
Step-by-step explanation:
The student is dealing with a situation where they are purchasing corn at a cash price of $4.50 per bushel and have an open position in the December Corn futures market at $3.80 per bushel. To determine the gain or loss in the futures, we must assume that the student had a hedge in place and is now lifting that hedge. If the future contract was entered at a higher price, selling it now would yield a loss per bushel equal to the difference. Conversely, if the contract was entered at a lower price, the difference would represent a gain.
For the net price paid for the corn, the cash price paid at the elevator must be combined with the realized gain or loss from the futures transaction. This requires knowledge of what the initial futures price was. Assuming the futures transaction was a perfect hedge, the net price would factor in the movement relative to the initial futures contract price. Without information on the initial futures transaction, a specific gain or loss calculation is not possible. However, the student can calculate the net price paid for the corn by subtracting any gain or by adding any loss from the futures market to the cash price paid.