Question

Refer to Practice 19-3 and complete the following:
1. Compute the total amount (including all forward-related cash flows) that the golf course developer will pay to buy 10,000 trees in Year 2, assuming that the price of a tree on January 1 of Year 2 is (a) $300, (b) $850, and (c) $500. Comment on your computations.
2. When the financial institution entered into the tree forward contract on January 1 of Year 1, which direction did the financial institution think that tree prices were going to go—up or down? Explain.



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  • CreatedApril 08, 2012
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