2. Identify several factors that would suggest that the company’s hedge would qualify as being highly effective in reducing the risk associated with the firm’s commitment to buy 100,000 bushels of...

2. Identify several factors that would suggest that the company’s hedge would qualify as being highly effective in reducing the risk associated with the firm’s commitment to buy 100,000 bushels of corn.

3. Explain why an option to sell corn rather than corn futures may provide the company with more flexibility.

4. Assume that at the time of acquiring the put option, the price of corn was more than $1.51. Explain why the option had a value of more than zero at inception.