The Health Bracelet Company will need 1,000 kg of copper in one year and is trying to decide between buying the copper on the spot market and using a forward contract. The spot price of copper is $15 per kilogram. The forward price is $19 per kilogram. Health Bracelet will need to rent a warehouse space to store the copper at a cost of $100 per month. Health Bracelet is able to borrow and lend at 4 percent per year. Should Health Bracelet buy its copper using the spot market or the forward market? Explain.

  • CreatedFebruary 25, 2015
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