Suppose a copper fabricator knows it will need 100,000 pounds of copper on May 15. The...
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Suppose a copper fabricator knows it will need 100,000 pounds of copper on May 15. The futures price for May delivery is 320 cents per pound. The fabricator can hedge its position by taking a long position in four futures contracts traded by the CME Group and closing its position on May 15. Each contract is for the delivery of 25,000 pounds of copper. What is the net cost of the strategy if the spot price of copper on May 15 proves to be 330 cents per pound? Suppose a copper fabricator knows it will need 100,000 pounds of copper on May 15. The futures price for May delivery is 320 cents per pound. The fabricator can hedge its position by taking a long position in four futures contracts traded by the CME Group and closing its position on May 15. Each contract is for the delivery of 25,000 pounds of copper. What is the net cost of the strategy if the spot price of copper on May 15 proves to be 330 cents per pound?
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To hedge its position the copper fabricator takes a long position in four futures contracts traded b... View the full answer
Related Book For
Financial Reporting And Analysis
ISBN: 9781260247848
8th Edition
Authors: Lawrence Revsine, Daniel Collins, Bruce Johnson, Fred Mittelstaedt, Leonard Soffer
Posted Date:
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