QUESTION $3$

It is now September $2015.$ A company anticipates that it will purchase $1$ million pounds of copper in January $2017.$ The company has

decided to use the futures contracts traded in the COMEX division of the CME Group to hedge its risk. One contract is for the delivery of

$25,000$ pounds of copper. The company's policy is to hedge $100\%$ of its exposure. Contracts with maturities up to $13$ months into the

future are considered to have sufficient liquidity to meet the company's needs. The following contracts are available on copper $($prices

are in CENTS per pound$).$

$($a$)$ In September $2015,$ how many contracts need to be entered? Enter whole number of contracts $-->$

$($b$)$ For part $($a$)$ indicate if the position is a long or short position. Enter short or long $($use all lowercase characters with no spaces$)-->$

long

$($c$)$ Calculate the total Profit or Loss from the futures hedges in January $2017$ when the hedges are closed. Note you want the total

amount accounting for the size of the position. not a profit loss per pound of copper. Enter answer in dollars $($NOT CENTS$)$ and do not

use the $ sign or commas. $-->$

$($d$)$ Calculate the net total effective cost of purchasing $1$ million pounds of copper on January $2017.$ Enter answer in dollars and do not

use the $ sign or commas. $-->$

QUESTION $4$

The following table gives data on monthly changes in the spot price and the futures price per lbs for a certain commodity.