The company P makes profit or loss from futures contract and whether it’s come under the cost of buying platinum.

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Answer 1

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Chapter 26, Problem 27PS

a.

Summary Introduction

To discuss: The company P makes profit or loss from futures contract and whether it’s come under the cost of buying platinum.

b.

Summary Introduction

To compute: .The profit or loss and total cost of platinum if spot price rise to 1400 after three months.

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Phoenix Motors wants to lock in the cost of 10,000 ounces of platinum to be used in next quarter's production of catalytic converters. It buys three-month futures contracts for 10,000 ounces at a price of $1,290 per ounce. Suppose the spot price of platinum falls to $1,195 in three months' time, answer the following: a-1. Calculate the profit or loss on the futures contract. Note: Enter the amount as a positive value. a-2. What is the total cost to Phoenix of buying the platinum? Suppose the spot price of platinum increases to $1,405 after three months, answer the following: b-1. Calculate the profit or loss on the futures contract. Note: Enter the amount as a positive value. b-2. What is the total cost to Phoenix of buying the platinum? a-2. Total cost b-2. Total cost

Consider a producer who is in the business of producing Cocoa for future sale. At the time of 0 (i.e., present time), we have S(O) = $1652, F(0) = $1675. The firm is expecting to sell the Cocoa in 2 months, while the delivery date of the futures contract is 3 months away. Assume that the price of Cocoa in two months is unpredictable, but we know that the future price in two months will be $8 higher than the spot price of Cocoa in two months (i.e., F(t) = S(t) + $8). Question 18. Without hedging, what is the firm's net profit at date t (i.e., in two months)? A) $23 B) $8 C) $31 D) $15

On the London Metals Exchange, the price for copper to be delivered in one year is $5,740 a ton. (Note: Payment is made when the copper is delivered.) The risk-free interest rate is 2.00% and the expected market return is 10%. a. Suppose that you expect to produce and sell 12,100 tons of copper next year. What is the PV of this output? Assume that the sale occurs at the end of the year. (Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.) b-1. If copper has a beta of 1.26, what is the expected price of copper at the end of the year? (Do not round intermediate calculations. Round your answer to 2 decimal places.) b-2. Assume copper has a beta of 1.26. What is the certainty-equivalent end-of-year price?

Answer 2

Question

Chapter 26, Problem 27PS

a.

Summary Introduction

To discuss: The company P makes profit or loss from futures contract and whether it’s come under the cost of buying platinum.

b.

Summary Introduction

To compute: .The profit or loss and total cost of platinum if spot price rise to 1400 after three months.

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Answer 3

Question

Chapter 26, Problem 27PS

a.

Summary Introduction

To discuss: The company P makes profit or loss from futures contract and whether it’s come under the cost of buying platinum.

b.

Summary Introduction

To compute: .The profit or loss and total cost of platinum if spot price rise to 1400 after three months.

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Answer 4

Question

Chapter 26, Problem 27PS

a.

Summary Introduction

To discuss: The company P makes profit or loss from futures contract and whether it’s come under the cost of buying platinum.

b.

Summary Introduction

To compute: .The profit or loss and total cost of platinum if spot price rise to 1400 after three months.

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Answer 5

Chapter 26, Problem 27PS

a.

Summary Introduction

To discuss: The company P makes profit or loss from futures contract and whether it’s come under the cost of buying platinum.

b.

Summary Introduction

To compute: .The profit or loss and total cost of platinum if spot price rise to 1400 after three months.

Answer 6

Chapter 26, Problem 27PS

a.

Summary Introduction

To discuss: The company P makes profit or loss from futures contract and whether it’s come under the cost of buying platinum.

Answer 7

Chapter 26, Problem 27PS

a.

Summary Introduction

To discuss: The company P makes profit or loss from futures contract and whether it’s come under the cost of buying platinum.

Answer 8

b.

Summary Introduction

To compute: .The profit or loss and total cost of platinum if spot price rise to 1400 after three months.

Answer 9

b.

Summary Introduction

To compute: .The profit or loss and total cost of platinum if spot price rise to 1400 after three months.

Answer 10

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Answer 11

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Answer 12

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Answer 13

Ch. 26 - Vocabulary check Define the following terms: a....Ch. 26 - Prob. 2PS Ch. 26 - Catastrophe bonds On some catastrophe bonds,...Ch. 26 - Futures and options A gold-mining firm is...Ch. 26 - Prob. 5PS Ch. 26 - Prob. 6PS Ch. 26 - Futures contracts List some of the commodity...Ch. 26 - Prob. 8PS Ch. 26 - Futures prices Calculate the value of a six-month...Ch. 26 - Futures prices In December 2017, six-month futures...

The company P makes profit or loss from futures contract and whether it’s come under the cost of buying platinum.

Solution Summary: The author explains how the company P makes profit or loss from futures contract and whether it’s come under the cost of buying platinum.

To discuss: The company P makes profit or loss from futures contract and whether it’s come under the cost of buying platinum.

To compute: .The profit or loss and total cost of platinum if spot price rise to 1400 after three months.

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Chapter 26 Solutions