Sixty futures contracts are used to hedge an exposure to the price of silver. Each futurescontract is on 5,000 ounces of silver. At the time the hedge is closed out, the basis is $0.20per ounce. What is the effect of the basis on the hedger’s financial position if (a) the traderis hedging the purchase of silver and (b) the trader is hedging the sale of silver?
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