One year wheat futures are trading at future price of 350


You are valuing your father’s wheat field. The field will produce 500 bushels of wheat in one year’s time and 600 bushels two years from now. The field will be useless after two years. The wheat will cost $0.50 per bushel to harvest. One year wheat futures are trading at future price of $3.50 and two year wheat futures have a future price of $3.80. The risk-free rate is 8%. What is the value of your father’s field?

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Financial Management: One year wheat futures are trading at future price of 350
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