Extreme weather events and citrus greening disease have negatively impacted orange (a type of citrus) cropping...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Extreme weather events and citrus greening disease have negatively impacted orange (a type of citrus) cropping yields in Florida, one of the world's largest producing citrus areas located in the United States of America. In April the futures price of Frozen Orange Juice Concentrate (FOJC) rose to a historical high of US $2.86 (or US 286 cents) per pound in April 2023. i. Explain using a formula how low orange cropping yields may influence the futures price of frozen orange juice concentrate? (1 mark) ii. iii. In April you bought two futures contracts on FOJC when the futures price was US 286 cents per pound with an initial margin of US $5,000 per contract. Each contract is for delivery of 15,000 pounds. If your maintenance margin is US $3,750 what price change in FOJC would lead to a margin call? (2 marks) Instead of futures contract, you entered a one-year long forward contract on FOJC in April 2023 when the forward price was US 286 cents per pound. Each contract is also for delivery of 15,000 pounds. After one month (t=1 month) the price of the forward concentrate was US 293 cents per pound. Assuming a risk-free rate of 5% with continuously compounding, what is the value of the forward contract after one month? (2 marks) Extreme weather events and citrus greening disease have negatively impacted orange (a type of citrus) cropping yields in Florida, one of the world's largest producing citrus areas located in the United States of America. In April the futures price of Frozen Orange Juice Concentrate (FOJC) rose to a historical high of US $2.86 (or US 286 cents) per pound in April 2023. i. Explain using a formula how low orange cropping yields may influence the futures price of frozen orange juice concentrate? (1 mark) ii. iii. In April you bought two futures contracts on FOJC when the futures price was US 286 cents per pound with an initial margin of US $5,000 per contract. Each contract is for delivery of 15,000 pounds. If your maintenance margin is US $3,750 what price change in FOJC would lead to a margin call? (2 marks) Instead of futures contract, you entered a one-year long forward contract on FOJC in April 2023 when the forward price was US 286 cents per pound. Each contract is also for delivery of 15,000 pounds. After one month (t=1 month) the price of the forward concentrate was US 293 cents per pound. Assuming a risk-free rate of 5% with continuously compounding, what is the value of the forward contract after one month? (2 marks)
Expert Answer:
Answer rating: 100% (QA)
i The futures price of frozen orange juice concentrate can be influenced by low orange cropping yields through the supplydemand dynamics of the market When orange cropping yields are low the supply of ... View the full answer
Related Book For
Fundamentals of Financial Management
ISBN: 978-0324302691
11th edition
Authors: Eugene F. Brigham, ? Joel F. Houston
Posted Date:
Students also viewed these accounting questions
-
Read the case study "Southwest Airlines," found in Part 2 of your textbook. Review the "Guide to Case Analysis" found on pp. CA1 - CA11 of your textbook. (This guide follows the last case in the...
-
Managing Scope Changes Case Study Scope changes on a project can occur regardless of how well the project is planned or executed. Scope changes can be the result of something that was omitted during...
-
Planning is one of the most important management functions in any business. A front office managers first step in planning should involve determine the departments goals. Planning also includes...
-
In Problems 1130, solve each equation by factoring. x 2 - 9x = 0
-
Oxazole is a live-membered aromatic heterocycle. Would you expect oxazole to be more basic or less basic than pyrrole?Explain. Oxazole N:
-
The article "An Investigation into the Ball Burnishing of Aluminium Alloy 6061-T6" (M. El-Axir, J Engineering Manufacture, 2007:1733-1742) presents the results of study that investigated the effects...
-
A partnership is formed by Terrence investing $150 000 and Marco investing $100 000. The partners are considering the following plans for dividing profits and losses. According to the ratio of their...
-
Wayne Rogers Corp. maintains its financial records on the cash basis of accounting. Interested in securing a long-term loan from its regular bank, Wayne Rogers Corp. requests you as its independent...
-
Assuming a rate of return of 8%, calculate the monthly savings needed for education assuming that savings will continue until the children's college education is completed. Education Because of the...
-
The whistleblowing aspects of this case were first discussed in the text. What follows is a more comprehensive discussion of accounting and auditing issues. In 2005, Tony Menendez, a former Ernst &...
-
The following unadjusted trial balance is prepared at fiscal year-end for Nelson Company. NELSON COMPANY Unadjusted Trial Balance January 31, 2019 Debit Credit $ 18, 500 14,000 5,400 2,300 42,700...
-
Since its founding in 2010, the Chinese communications technology company Xiaomi has established itself as a true competitor among both global incumbents like Apple and Samsung and local niche...
-
Define and give an example of an immediate predecessor.
-
How do existing systems influence the architecture of new systems in the same organization?
-
Which criteria to pick a strategy do you consider most important? Why? Name one company that failed because it did not follow your Ee What should it have done instead?
-
Consider the automobile industry. Identify competitors to Ford SUVs and organize them in terms of their intensity of competition. Also organize them into strategic groups. What are the key success...
-
For 12 pairs offemales, the reported means are 24.8 on the well-being measure forthe children of alcoholics and 29.0 for the control group. A t teststatistic of 2.67 for the test comparing the means...
-
Consider model (9.18). What is the effect on the model parameter estimates, their standard errors, and the goodness-of-fit statistics when (a) The times at risk are doubled, but the numbers of deaths...
-
Investors are more concerned with future dividends than historical dividends, so go to ESTIMATES and scroll down to the Consensus Estimates section. Click on the Available Measures menu to toggle...
-
Begin by taking a look at the historical performance of the overall stock market. If you want to see, for example, the performance of the S&P 500, select INDICES and enter S&PCOMP. Click on...
-
To provide a starting point for gauging a companys relative valuation, analysts often look at a companys price-to-earnings (P/E) ratio. Returning to the COMPANY OVERVIEW page, you can see XOMs...
-
R&B Beverages, Inc., provides a complete line of beer, wine, and soft drink products for distribution through retail outlets in central Iowa. Unit price data for 2008 and 2011 and quantities sold in...
-
A large manufacturer purchases an identical component from three independent suppliers that differ in unit price and quantity supplied. The relevant data for 2009 and 2011 are given here. a. Compute...
-
Data on quantities of three items sold in 1997 and 2011 are given here along with the sales prices of the items in 1997. Compute a weighted aggregate quantity index for 2011. Quantity Sold Item 1997...
Study smarter with the SolutionInn App