Commodity Hedging-Short SPOT MARKETFUTURES MARKET 5/1/99 GROWING GRAIN 5000 $2.00 5/1/99 SELL CONTRACT 5000 $2.10 8/1/99 SELL GRAIN SPOT 5000 $2.20 8/1/99 BUY CONTRACT 5000 $2.28 GAIN = 5000 BU. X $.20 = $1000 LOSS = 5000 BU. X $.18 = $900 NET = $100

Commodity Hedging-Short SPOT MARKETFUTURES MARKET 5/1/99 GROWING GRAIN 5000 $2.00 5/1/99 SELL CONTRACT 5000 $2.10 8/1/99 SELL GRAIN SPOT 5000 $1.80 8/1/99 BUY CONTRACT 5000 $1.80 LOSS = 5000 BU. X $.20 = $1000 GAIN = 5000 BU. X $.30 = $1500 NET = $500

Commodity Hedging-Long SPOT MARKETFUTURES MARKET 5/1/99 SHORT GRAIN 5000 $2.00 5/1/99 BUY CONTRACT 5000 $2.10 8/1/99 BUYS GRAIN SPOT 5000 $1.80 8/1/99 SELL CONTRACT 5000 $1.80 GAIN = 5000 BU. X $.20 = $1000 LOSS = 5000 BU. X $.30 = $1500 NET = -$500

Commodity Hedging-Long SPOT MARKETFUTURES MARKET 5/1/99 SHORT GRAIN 5000 $2.00 5/1/99 BUY CONTRACT 5000 $2.10 8/1/99 BUYS GRAIN SPOT 5000 $2.30 8/1/99 SELL CONTRACT 5000 $2.35 LOSS = 5000 BU. X $.30 = $1500 GAIN = 5000 BU. X $.25 = $1250 NET = -$250

Bond Prices Bond prices are quoted as follows: The “23” is 23/32nds of $ /32 =.719 Therefore, is equivalent to $ Similarly, is $965.

Interest Rate Hedging-Long CASH MARKETFUTURES MARKET 5/1/99 SHORT BONDS /1/99 BUY 1 CONTRACT /1/99 BUY BONDS CASH /1/99 SELL CONTRACT LOSS = Bond GAIN = Bond NET = $5.52/ Bond X 100 Bonds = $552.00

Interest Rate Hedging-Long CASH MARKETFUTURES MARKET 5/1/99 SHORT BONDS /1/99 BUY 1 CONTRACT /1/99 BUY BONDS CASH /1/99 SELL CONTRACT GAIN = Bond LOSS = Bond NET = 0

Interest Rate Hedging-Short CASH MARKETFUTURES MARKET 5/1/99 HOLD BONDS /1/99 SELL 1 CONTRACT /1/99 MARK TO MARKET /1/99 BUY CONTRACT GAIN = Bond LOSS = Bond NET = $2.81/ Bond X 100 Bonds = $281.00

Interest Rate Hedging-Short CASH MARKETFUTURES MARKET 5/1/99 HOLD BONDS /1/99 SELL 1 CONTRACT /1/99 MARK TO MARKET /1/99 BUY CONTRACT LOSS = Bond GAIN = Bond NET = $.93/ Bond X 100 Bonds = $93.00