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Question (3): One orange juice futures contract is on 15,000 pounds of frozen concentrate. Suppose that in September 2009 a company sells a March 2011 orange juice futures contract for 120 cents per pound. In December 2009 the futures price is 140 cents. In December 2010 the futures price is 110 cents. In February 2011 the futures price is 125 cents. The company has a December year end. (3-1) What is the company’s profit or loss on the contract? (3-2) How is the company’s profit or loss taxed if the company is classified as a) a hedger and b) a speculator? Assume that the corporate tax rate is 40%.
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