Suppose that, on October 24, 2022, a company sells one April 2023 live cattle futures contract. It closes out its position on January 21, 2023. The futures price (per pound) is 121.20 cents when it enters into the contract, 118.30 cents when it closes out its position, and 118.80 cents at the end of December 2022. One contract is for the delivery of 40,000 pounds of cattle. What is the total profit? How is it

Suppose that, on October 24, 2022, a company sells one April 2023 live cattle futures contract. It closes out its position on January 21, 2023. The futures price (per pound) is 121.20 cents when it enters into the contract, 118.30 cents when it closes out its position, and 118.80 cents at the end of December 2022. One contract is for the delivery of 40,000 pounds of cattle. What is the total profit? How is it

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

Assume that the price of December 2021 corn futures is $4.65/bushel in February and $4.50 in October. If spot cash price in October is $4.55, what is the farmer's total revenue? Assume he entered into 20 contracts. Each corn contract is 5000 bushels.
Suppose that on September 05, 2021, a company takes a short position in one April 2022 live - cattle futures contract. One contract is for the delivery of 50,000 pounds of cattle. The initial margin for each contract is $\$ 3, 000 $ and the maintenance margin is $\$ 2,000 $. The futures price (per pound) is 180.00 cents when it enters into the contract.(a) If the company receives a margin call at the end of the third day to deposit a variation margin of $1250, what is the settlement price at the end of the day?
(1) A trader signs a Forward contract on April 30 for the delivery of 500 gallons of oil on October 31. The risk-free rate is 5.00% on April 30 and the current price of oil is $30 per gallon. Each gallon of storage costs $0.03 per day.a. What will be the fair forward price on April 30?b. If the spot price of oil is $45 per gallon on July 31, what profit or loss would the trader incur if they close out (cash settle) their position?
A trader bought two July futures contracts. Each contract is for the delivery of 1,000 barrels. The initial margin is $11,250 per contract and the maintenance margin is $9,000. Calculate the daily gain and loss and margin account balance from April 13, 2020 to April 15, 2020 and explain when the investor will receive a margin call and how much does he need to top up?
A company enters into long position in three futures contracts in wheat for 650 cents per bushel. Each contract is based on 5,000 bushels and quoted in cents per bushel. The initial margin is $5,000 and the maintenance margin is $3,000 per contract. The company will be allowed to withdraw any balance in the margin account in excess of the initial margin and the company will get a margin call if the balance is going below the maintenance margin. Please fill in the following blanks. a. There is a margin call if the futures price goes down by(sample answer: 20 cents) to the price of per bushel (sample answer: 800 cents)? b. $1,500 will be withdrawn from the margin account if the price goes up by(sample answer: 20 cents) to the price of per bushel (sample answer: 800 cents)?
Suppose you sell seven March 2021 silver futures contracts on December 4, 2020, at the last price of the day. Use Table 25.2. a. What will your profit or loss be if silver prices turn out to be $25.01 per ounce at expiration? (Enter your answer as a positive value. Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) b. What will your profit or loss be if silver prices are $23.13 per ounce at expiration? (Enter your answer as a positive value. Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) a. b.
Given the following information, what would you expect to be the minimum price at which a 3 month futures contract for 100 bushels of wheat would be trading? The spot price of wheat is $8 per bushel. Storage and insurance costs for wheat are $.50 per 100 bushels, per month, payable at the end of the storage period. • You can borrow money at 8% per year. a) $865.50 b) $814.50 c) $816.50 d) $817.5
Zoro Company enters into a contract to sell Product A and Product B on July 1, 2020 for an upfront cash payment of P250,000. Product A will be delivered at the end of the year, and Product B will be delivered the following year. Zoro Company sells Product A for P80,000 and Product B for P240,000. 1. How many performance obligations are there in the contract? 2.what is the transaction price? 3.how much is revenue to be recognized in 2020? 4. how much is revenue to be recognized in 2021?
Minetech Resources Berhad anticipates the need to purchase 80,000 bushels of soybeans in six months to use in their products. The current cash price for soybeans is RM5.50 a bushel. A six-month futures contract for soybeans can be purchased at RM5.53. Show all your working steps. i)Explain why Minetech Resources Berhad might need to purchase futures contracts to hedge their position. ii)To completely hedge their exposure, how many contracts will they need to purchase? Soybeans trade in 5,000-bushel contracts. iii)If the cash price of soybeans ends up at RM5.75 per bushel after six months, by how much will the actual cost of 80,000 bushels of soybeans have gone up? iv)After the futures contracts are closed outsold at RM5.75, what will be the gain on the futures contracts? v)Considering the answers to parts (iii) and (iv), what is their net position?
A company enters into 2 long futures contracts on a commodity for 200 cents per unit. Each contract is on 10,000 units of the commodity. The initial margin per contract is $2,500 and the maintenance margin per contract is $2,000. At what futures price will the balance in the margin account equal maintenance margin? a. 205 cents. b. 195 cents. c. 190 cents.
Q3) Suppose that on November 15th, 2021 a company purchased ( i.e. long) one May 2022 live cattle futures contract. One contract is for the delivery of 40,000 pounds of cattle. It closed out its position on February 18th, 2022. The futures price ( per pound) was 135 cents when it entered into the contract, and 139 cents when it closed out its position. The futures price at the end of the year on December 31, 2021 was 136 cents. Assume the company has a Dec 31 year end for tax purposes. What is the total profit? How is it taxed if the company is (a) a hedger, and (b) a speculator ?
XYZ flour company is planning to buy wheat for the next year’s production. 10,000 bushels of wheat will be purchased each quarter, on the 15th of January, April, July, and October in 2022. It wants to lock the wheat price using a futures contract, and at the same time use a swap to prepare the expenditure. The spot price of wheat today (April 15, 2021) is $3.1 per bushel, and the company enters futures contracts today. The prevailing interest rate is 1.5%, compounded continuously. Recall that each futures contract is for 5000 bushels and assume no storage cost of wheat. (a) If the company uses a prepaid swap, what is the prepayment? (b) If the company uses a plain vanilla swap for the quarterly purchase next year, what is the fixed amount?