On 10 Jan, Tacoma Ltd anticipate that it will need Australian dollars (A$) in March when...

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On 10 Jan, Tacoma Ltd anticipate that it will need Australian dollars (A$) in March when it orders supplies from an Australian supplier. The company purchase a future contract, specifying A$100,000 and a March Settlement date (which is 19 March for this contract). On Jan 10, the future contract is priced at GBP0.39/A$. On 15 February, Tacoma realizes that it will not order supplies, therefore no need for A$ in March. On 15 February, the spot price in the Market was to be at GBP0.42/A$. Show how can the Tacoma Ltd close the contract before the expiration day. Determine whether profit or loss to be made the company close the contract before the maturity data. Determine the amount of profit or loss to be made by closing the contract before the maturity date. On 10 Jan, Tacoma Ltd anticipate that it will need Australian dollars (A$) in March when it orders supplies from an Australian supplier. The company purchase a future contract, specifying A$100,000 and a March Settlement date (which is 19 March for this contract). On Jan 10, the future contract is priced at GBP0.39/A$. On 15 February, Tacoma realizes that it will not order supplies, therefore no need for A$ in March. On 15 February, the spot price in the Market was to be at GBP0.42/A$. Show how can the Tacoma Ltd close the contract before the expiration day. Determine whether profit or loss to be made the company close the contract before the maturity data. Determine the amount of profit or loss to be made by closing the contract before the maturity date.

Answer rating: 100% (QA)

Answer To close the contract before the expiration date Tacoma Ltd has to sell the future contract o... View the full answer