Suppose a farmer is expecting that her crop of oranges will be ready for harvest and...
Suppose a farmer is expecting that her crop of oranges will be ready for
harvest and sale as 150,000 pounds of orange juice in 3
months time. Suppose each orange juice futures contract is for 15,000
pounds of orange juice, and the current futures price is F0=118.65 cents-per-pound.
Assuming that the farmer has enough cash liquidity to fund
any margin calls, what is the risk-free price that she can guarantee herself.
Homework Answers
Here farmer faces risk that price of orange may fall and he may not be able to realize its present value . To hedge this risk he should by future contract to guarantee cash flow in future. Here future contract is available for 118.65 cent per pound
Guaranteed Risk free price = 150,000*118.65 = 177,97,500 $
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Suppose a farmer is expecting that her crop of oranges will be
ready for
harvest and...
Please, show clear work if you need thumbs up, be sure the answer is right, if...
Please, show clear work if you need thumbs up, be sure the
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1. One orange juice futures contract is on 15,000 pounds of frozen concentrate. Suppose that in September 2016 a company sells a March 2018 orange juice futures contract for 125 cents per pound. In December 2016, the futures price is 140 cents, in December 2017, it is 115 cents; and in February 2018, it is...
Suppose a soybean producer planted 2,000 acres – with an average yield of 40 bushel an...
Suppose a soybean producer planted 2,000 acres – with an average yield of 40 bushel an acre. Current soybean prices are $9.10/bushel, but are expected to fall because of declining demand from China. The producer can enter into a 4-month futures contact at a price of $8.80/bushel. After 4 months, the producer will harvest and sell the crop. A standard soybean contract is written for 5,000 bushels. a. If the soybean farmer wants to hedge to reduce the risk that...
IFO Simulation Review By Duke @ Masterability Question 1 Part A: A trader buys two July...
IFO Simulation Review By Duke @ Masterability Question 1 Part A: A trader buys two July futures contracts on frozen orange juice. Each contract is for the delivery of 15,000 pounds. The current futures price is 160 cents per pound, the initial margin is $6,000 per contract, and the maintenance margin is $4,500 per contract. (a) What price change would lead to a margin call? (5 points) (b) Under what circumstances can $2,000 be withdrawn from the margin account? (5...
It is now October 2016. A company anticipates that it will purchase 1 million pounds of...
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I know this question has already been answered on this site but the solution did not...
I know this question has already been answered on this site but
the solution did not provide me with enough explanation, Please
explain why at the beginning 96 shares are entered into and please
also explain why each date of the transactions are choosen. Thanks,
the 96 shares that is on the solution if you look this question up
it has been answered already. The first step is to enter into 96
september 2015 contracts. I am wondering how this...
Suppose you purchase a May 2017 coffee futures contract on this day at the last price of the day. Use Table 23.1 What will your profit or loss be if coffee prices turn out to be $1.4567 pe...
Suppose you purchase a May 2017 coffee futures contract on this
day at the last price of the day. Use Table 23.1
What will your profit or loss be if coffee prices turn out to be
$1.4567 per pound at expiration? (Do not round intermediate
calculations. Enter your answer as a positive value and round your
answer to 2 decimal places, e.g., 32.16.)
Table 23.1:
Sample Wall Street Journal Futures Price Quotations TABLE 23.1 Metal &Petroleum Futures Contract Op en...
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covered call writer break even at (4) The current price of an asset is $100, An...
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Suppose you purchase a July 2011 soybean oil futures contract on March 29, 2011, at the...
Suppose you purchase a July 2011 soybean oil futures contract on
March 29, 2011, at the last price of the day. Use Table 23.1
What will your profit or loss be if soybean oil prices turn out
to be $0.4652 per pound at expiration
Suppose you sell eight May 2011 silver futures contracts on
March 29, 2011, at the last price of the day. Use Table 23.1
What will your profit or loss be if silver prices turn...
Suppose you purchase a March 2017 oats futures contract on this day at the last price...
Suppose you purchase a March 2017 oats futures contract on this day at the last price of the day. Use Table 23.1 What will your profit or loss be if oats prices turn out to be $2.4713 per bushel at expiration? (Do not round intermediate calculations. Enter your answer as a positive value and round your answer to 2 decimal places, e.g., 32.16.) Loss TABLE 23.1 Sample Wall Street Journal Futures Price Quotations Chg Open interest -0.0125 -0.0130 6 72...
Please, show clear work if you need thumbs up, be sure the
answer is right, if the answer is incorrect you will get thumbs
down.
1. One orange juice futures contract is on 15,000 pounds of frozen concentrate. Suppose that in September 2016 a company sells a March 2018 orange juice futures contract for 125 cents per pound. In December 2016, the futures price is 140 cents, in December 2017, it is 115 cents; and in February 2018, it is...
IFO Simulation Review By Duke @ Masterability Question 1 Part A: A trader buys two July futures contracts on frozen orange juice. Each contract is for the delivery of 15,000 pounds. The current futures price is 160 cents per pound, the initial margin is $6,000 per contract, and the maintenance margin is $4,500 per contract. (a) What price change would lead to a margin call? (5 points) (b) Under what circumstances can $2,000 be withdrawn from the margin account? (5...
It is now October 2016. A company anticipates that it will purchase 1 million pounds of copper in each of February 2017, August 2017, February 2018, and August 2018. The company has decided to use the futures contracts traded by the CME Group to hedge its risk. One contract is for the delivery of 25,000 pounds of copper. The initial margin is $2,000 per contract and the maintenance margin is $1,500 per contract. The company's policy is to hedge 80%...
I know this question has already been answered on this site but
the solution did not provide me with enough explanation, Please
explain why at the beginning 96 shares are entered into and please
also explain why each date of the transactions are choosen. Thanks,
the 96 shares that is on the solution if you look this question up
it has been answered already. The first step is to enter into 96
september 2015 contracts. I am wondering how this...
Suppose you purchase a May 2017 coffee futures contract on this
day at the last price of the day. Use Table 23.1
What will your profit or loss be if coffee prices turn out to be
$1.4567 per pound at expiration? (Do not round intermediate
calculations. Enter your answer as a positive value and round your
answer to 2 decimal places, e.g., 32.16.)
Table 23.1:
Sample Wall Street Journal Futures Price Quotations TABLE 23.1 Metal &Petroleum Futures Contract Op en...
Question 3. Assume that it is now October 2014 and a company anticipates that will need to purchase 1 million kilogram of copper in each of February 2015, August 2015, February 2016, and August 2016. The Chief Finance Officer has decided to hedge 80% of the company's exposure using copper futures. The size of one copper futures contract is 25,000 pounds of copper. The initial margin and the maintenance margin for each copper contract are $2,000 and $1,500, respectively. Contracts...
covered call writer break even at (4) The current price of an asset is $100, An out-of-the-money American put option with an exercise price of $90 is purchased along with'the asset. If the breakeven point for this hedge is at an asset price of $114 at expirationjwhatis the value of the American put at the time of purchase? (5) A stock index fiutures what is your per-share gain or loss? ying two calls and one put on ABC stock, all...
Suppose you purchase a July 2011 soybean oil futures contract on
March 29, 2011, at the last price of the day. Use Table 23.1
What will your profit or loss be if soybean oil prices turn out
to be $0.4652 per pound at expiration
Suppose you sell eight May 2011 silver futures contracts on
March 29, 2011, at the last price of the day. Use Table 23.1
What will your profit or loss be if silver prices turn...
Suppose you purchase a March 2017 oats futures contract on this day at the last price of the day. Use Table 23.1 What will your profit or loss be if oats prices turn out to be $2.4713 per bushel at expiration? (Do not round intermediate calculations. Enter your answer as a positive value and round your answer to 2 decimal places, e.g., 32.16.) Loss TABLE 23.1 Sample Wall Street Journal Futures Price Quotations Chg Open interest -0.0125 -0.0130 6 72...
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