Dorothy Wax has 10 000 shares in Skeg Ltd. The current price per share in Skeg Ltd is $9.50. Dorothy
Dorothy Wax has 10 000 shares in Skeg Ltd. The current price per share in Skeg Ltd is $9.50. Dorothy would like to sell the shares immediately, but certain restrictions have been imposed upon her that mean she will have to wait one month.
Concerned about fluctuating prices, she decides to enter a futures contract on Skeg Ltd shares in which she takes a sell position. The price of a Skeg Ltd future is $9.70 and her futures contract is for 10 000 units.
One month later the price of Skeg Ltd shares has risen to $12.10, and a Skeg Ltd future costs $12.29. Dorothy closes out her futures contract and sells her shares.
How much does Dorothy ultimately receive from the above transactions?
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