Answered: futures contract

Business

Accounting

futures contract

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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For each of the following scenarios, answer these two questions: 1. Ďoes the contract fall under the provisions of the Australian Consumer Law (ACL)? (Answer 'yes' or 'no') 2. With reference to the ACL, explain why you said yes or no. a) Peach purchases a large silver and glass display cabinet for $32,00 for her clothing and jewellery shop. b) Maddy buys a second-hand BMW from her professor, Zoe, for $10,000. c) A large furniture company pays $9,000 for precious walnut timber to build a cupboard. d) Brittany buys herself a brand-new Corvette for her 21st birthday for $120,000. e) Oliver makes the winning bid of $5,000 for a set of golf clubs at a traditional auction.
Bill is cleaning his basement and finds an old vase. Believing the vase is worthless he sells it for $50.00. Later he discovers that the vase was really worth $25,000. Bill will be able to: A) recover $25,000. B) not recover anything because mistakes in judgement as to value do not permit you to avoid a contract. C) rescind the contract D) all of the above
Finance, based on a problem from “Principles of Economics” by N. GregoryMankiw Gemma considers buying a rare Pokémon card for $20,000 with a plan to sell it in 20 years andto buy a house worth $200,000. Price of the house doesn’t change over time. a) A collector offers a contract agreeing to buy the card from Gemma for $200,000 in 20 years.• Should Gemma buy the card and sign the contract if the interest rate is 7.5%?• Should Gemma buy the card and sign the contract if the interest rate is 10%? • Should Gemma buy the card and sign the contract if the interest rate is 12.5%? • Should Gemma buy the card and sign the contract if the interest rate is 15%? • Find the exact interest rate at which Gemma would be indifferent between (i) buying thecard and signing the contract and (ii) not buying the card. b) Gemma buys the card and realizes that its price increases by 23% every year!1 In how manyyears will Gemma be able to afford a house? How much money will she have for decoratingher new…
Suppose that Alex's benefit to the game is $128. Suppose further that Alex already bought a ticket (price of $80). Finally, suppose his non-refundable ticket has no resale value. Suppose that Alex's boss is considering paying a raise to Alex if he goes to work. Which of the following is true? (select all that apply) If Alex receives a $80 raise, then he will be indifferent between going to work and going to the game. If Alex does not get a raise, then he will definitely go to the game. If Alex receives a $60 raise, then he will NOT go to the game. I Alex receives a $100 raise then he will NOT go to the game.
Would Qualifying an Indorsement Be Ethical? Suppose you have taken a promissory note for $3,500 payable in 12 months with interest at 10 percent as payment for some carpentry work you did for a friend. You have some reason to believe the maker of the note is in financial difficulty and may not be able to pay the note when it is due. You discuss with an elderly neighbor the possibility of her buying the note from you as an investment, and she agrees to buy it from you for $3,000. Would it be ethical for you to indorse the note with a qualified indorsement ("without recourse")?
Suppose a life insurance company sells a $250,000 one-year term life insurance policy to a 24-year-old female for $360. The probability that the female survives the year is 0.999477. Compute and interpret the expected value of this policy to the insurance company. The expected value is $ (Round to two decimal places as needed.) Which of the following interpretation of the expected value is correct? O A. The insurance company expects to make an average profit of $32.71 on every 24-year-old female it insures for 1 month. O B. The insurance company expects to make an average profit of $359.81 on every 24-year-old female it insures for 1 year. O C. The insurance company expects to make an average profit of $20.84 on every 24-year-old female it insures for 1 month. O D. The insurance company expects to make an average profit of $229.25 on every 24-year-old female it insures for 1 year.
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Freddie the Farmer currently has soybeans growing in his fields. Freddie's concerned that the price of soybeans may decline before he has the chance to take his output to market in 3 months. Freddie believes his crop yield will be 120,000 bushels of soybeans so he contacts a broker and is quoted a price of $3.50 for 3-month soybean futures contract (assume each contract is for 15,000 bushels). The broker informs Freddie that his initial margin will be $3,000 per contract with a maintenance margin of $1,500 per contract. Based on this information, answer the following questions (YOU MUST SHOW ALL CALCULATIONS TO RECEIVE CREDIT): Should Freddie go long or short in soybeans? Why? How many contracts should Freddie transact in? How much is each contract worth at inception? How much must Freddie remit to the broker (in total) at the time the futures contracts are purchased? If the futures price increases to $3.62 one month into the contract, what is the value of each contract?…
1. What are the advantages and disadvantages of offering credit? 2. What precautions should she take before offering credit to people like John? 3. If Kate grants credit to John, the terms will be 2/10, n/30. Assuming the payment is made during the 10-day discount period, what would be the journal entry to record the sale and then subsequent payment? 4. If instead of playing early John pays in 25 days, what would the journal entry to record the payment? 5. Rather than providing the financing directly, assume that Kate decides to allow the use of credit cards. Further, assume that during the month there is 15,000 worth of credit cards sales. Provide the journal entry to record the sales, along with the associated credit card fee. The cost of goods sold total is 13,500.
Freddie the Farmer currently has soybeans growing in his fields. Freddie's concerned that the price of soybeans may decline before he has the chance to take his output to market in 3 months. Freddie believes his crop yield will be 120,000 bushels of soybeans so he contacts a broker and is quoted a price of $3.50 for 3-month soybean futures contract (assume each contract is for 15,000 bushels). The broker informs Freddie that his initial margin will be $3,000 per contract with a maintenance margin of $1,500 per contract. Based on this information, answer the following questions Should Freddie go long or short in soybeans? Why? How many contracts should Freddie transact in? How much is each contract worth at inception? How much must Freddie remit to the broker (in total) at the time the futures contracts are purchased? If the futures price increases to $3.62 one month into the contract, what is the value of each contract? What will Freddie have to do per the terms of the…
Jessica's utility of income is represented by: U(I) = V(241) where I represents annual income. She is offered a job that has a 0.3 chance of earning $21970 and a 0.7 chance of earning $62150 a year. How much would Jessica be willing to pay to insure against the risky income? Answer: $ (DO NOT ROUND YOUR CALCULATIONS UNTIL YOU REACH THE FINAL ANSWER. ENTER YOUR RESPONSE ROUNDED TO TWO DECIMAL PLACES, AND NO SEPARATOR FOR THOUSANDS.)
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