16 5 points On September 1, Low Rent Industries, an industrial materials company, decides to hedge...

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16 5 points On September 1, Low Rent Industries, an industrial materials company, decides to hedge the price of steel in anticipation of inventory purchases in November. To achieve this hedge, the company purchases 50 call option contracts on steel that expire in November. The options have a strike price of $160 per metric ton of steel. Each option contract has a notional amount of 500 metric tons of steel. The options settle on November 30. Details on the spot price and futures price of steel are provided in the table below (all prices are per metric ton of steel). The company has a calendar fiscal year, and prepares complete financial statements on a quarterly basis. Fiscal quarters end on the last day of March, June, September, and December. On December 1, the company purchases 25,000 metric tons of steel at the November 30 spot price. The inventory is sold on January 3 at a price of $180.00 per metric ton. The hedge has been designated and qualifies as a cash flow hedge. Date September 1 Spot Price $158.00 September 30 $162.50 October 31 $164.00 November 30 $170.00 November Futures Price Option Premium $175 $2.50 $182 $4.00 $187 $5.00 $194 ???? The gain (loss) from this transaction that would be reported in the fourth quarter is: Type your answer... 16 5 points On September 1, Low Rent Industries, an industrial materials company, decides to hedge the price of steel in anticipation of inventory purchases in November. To achieve this hedge, the company purchases 50 call option contracts on steel that expire in November. The options have a strike price of $160 per metric ton of steel. Each option contract has a notional amount of 500 metric tons of steel. The options settle on November 30. Details on the spot price and futures price of steel are provided in the table below (all prices are per metric ton of steel). The company has a calendar fiscal year, and prepares complete financial statements on a quarterly basis. Fiscal quarters end on the last day of March, June, September, and December. On December 1, the company purchases 25,000 metric tons of steel at the November 30 spot price. The inventory is sold on January 3 at a price of $180.00 per metric ton. The hedge has been designated and qualifies as a cash flow hedge. Date September 1 Spot Price $158.00 September 30 $162.50 October 31 $164.00 November 30 $170.00 November Futures Price Option Premium $175 $2.50 $182 $4.00 $187 $5.00 $194 ???? The gain (loss) from this transaction that would be reported in the fourth quarter is: Type your answer...