1. You are a wheat farmer with a crop that will be ready to harvest in approximately three months. How can you hedge this crop and what are the advantages and disadvantages of doing so?
2. Explain how options can be used to manage risk. Provide an example using a call option and another example using a put option.
3. What is business risk? What is financial risk? Assume an all-equity firm starts to borrow with 30% debt ratio. If the unlevered beta-15, what will be the leveled beta using Hamada's equation if the tax rate-40%?