On March 1 the price of a commodity is $1,000 and the December futures price is $1,015 . On November 1 the price is $980 and the December futures price is $981
A producer of the commodity entered into a December futures contracts on March 1 to hedge the sale of the commodity on November 1 . It closed out its position on November 1 . What is the effective price (after taking account of hedging) received by the company for the commodity?
A. $1,016
B. $1,001
C. $981
D. $1,014
D
The producer of the commodity takes a short futures position. The gain on the futures is 1015?981 or $34 . The effective price realized is therefore 980+34 or $1014 . This can also be calculated as the March 1 futures price (=1015) plus the November 1 basis (=?1).
You might also like to view...
In raising capital, an IC can look
A. at developing country markets. B. at IMF loans. C. at checking account facilities and overdraft protection. D. within the larger company and in home, host-country, and third-country capital markets.
In Crystal Ball, probability distributions for input variables can be specified using either built-in functions or using Crystal Ball's menu
Indicate whether the statement is true or false
An employee may disclose a trade secret unless there is a specific employment contract provision prohibiting this action
Indicate whether the statement is true or false
The Dow Jones Industrial Average and the Standard & Poor's Industrial Index have a number of similarities and differences. Discuss at least two major similarities and major differences between these two market indicators
What will be an ideal response?