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Please answer questions 12-15 based on the following information: On November 1, 2009, Hills Gold Processing Company had 250 ounces

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Please answer questions 12-15 based on the following information: On November 1, 2009, Hills Gold Processing Company had 250 ounces of unprocessed gold inventory at a cost of $500 per ounce. The cost of processing the gold is $200 per ounce and the processing takes 5 days. All the volatility in Hills earnings is related to the price fluctuations in processed gold prices. To hedge this position Hills entered into a futures agreement on November 1, 2009 to sell 250 ounces of processed gold on March 15, 2010 for $915 per ounce. The market value of processed gold on November 1, 2009 is $925 per ounce. The hedge qualifies as a fair value hedge of the gold inventory. The price for this futures contract is $975 per ounce on December 31, 2009. Hills Company exits the futures contract on March 15, 2010 when the futures price for this contract is $865. 14. The realized gain (loss) to Hills Company on the futures contract on March 15, 2010 is : 

A. $12,500 gain 

B. $12,500 loss 

C. $27,500 loss 

D. $27, 500 gain

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Optics

Optics

ISBN: 978-0133977226

5th edition

Authors: Eugene Hecht

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Posted Date: November 04, 2022 05:26:26
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A money market hedge is a technique used to lock in the value of a foreign currency transaction in a company\'s domestic currency. Therefore, a money market hedge can help a domestic company reduce its exchange rate or currency risk when conducting business transactions with a foreign company.

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