A company will buy 120 units of a certain commodity in one year. It decides to...
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A company will buy 120 units of a certain commodity in one year. It decides to hedge 70% of its exposure using futures contracts. The spot price and the futures price are currently $25 and $22 respectively. The spot price and the futures price in one year turn out to be $20 and $22.50 respectively. What is the average price paid for the commodity? Consider a coal mine that sells brown coal. It seeks to hedge its brown coal sales using coking coal futures contracts. On initiating the naïve futures hedge, the coking coal spot and futures prices are 52USD/tonne and 55USD/tonne respectively. The brown coal spot price is 65USD/tonne. On closing out the hedge 2 months later, the coking coal spot and futures prices are 38USD/tonne and 40USD/tonne respectively. The brown coal spot price is 67USD/tonne. Taking into account the profit/loss on the hedge, the price received is? A company will buy 120 units of a certain commodity in one year. It decides to hedge 70% of its exposure using futures contracts. The spot price and the futures price are currently $25 and $22 respectively. The spot price and the futures price in one year turn out to be $20 and $22.50 respectively. What is the average price paid for the commodity? Consider a coal mine that sells brown coal. It seeks to hedge its brown coal sales using coking coal futures contracts. On initiating the naïve futures hedge, the coking coal spot and futures prices are 52USD/tonne and 55USD/tonne respectively. The brown coal spot price is 65USD/tonne. On closing out the hedge 2 months later, the coking coal spot and futures prices are 38USD/tonne and 40USD/tonne respectively. The brown coal spot price is 67USD/tonne. Taking into account the profit/loss on the hedge, the price received is?
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Lets calculate the average price paid for the commodity when the company hedges 70 of its exposure u... View the full answer
Related Book For
Introduction To Corporate Finance
ISBN: 9781118300763
3rd Edition
Authors: Laurence Booth, Sean Cleary
Posted Date:
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