It is February 2021. A manufacturer expects to purchase 6000 metric tons of aluminum in August 2021. Considering the recent uptrend in the aluminum market, the company plans on using the August 2021 Aluminum futures from the CME markets to manage their risk exposure. Specifically, they want to create a hedge position to remove the uncertainty about their buying price as much as possible. And the August Aluminum futures contract is a perfect match for their need for the hedge. The Aluminum spot price is currently at $2,139 per metric ton and the August 2021 Aluminum futures contract that is trading at $2,186. Each contract is for the delivery of 25 metric tons.

If the August 2021 Aluminum futures is $2,352 in August 2021, what will be the effective aluminum buying price per metric ton to be paid by the company? (Note: Round to the nearest $1.)

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To determine the effective aluminum buying price per metric ton to be paid by the company after usin... View the full answer