Advanced Accounting
12th Edition
ISBN: 9781305084858
Author: Paul M. Fischer, William J. Tayler, Rita H. Cheng
Publisher: Cengage Learning
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Chapter 9.M, Problem 6.1E
To determine
Journal Entries:
Accounting can be tracked by a
To prepare: The journal entries through June.
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In February, a company wanted to hedge the future purchase of crude oil some time in June or July by using August oil futures
contracts. The August oil futures price was $72.00 per barrel. When the company decided to buy crude oil in July, the oil spot price was
$79 and the August oil futures price was $74. Calculate the net cost of purchasing the oil with hedging.
O $72
O $74
O $77
O $79
O $81
Assume that an investor buys one March NYSE Composite Index futures contract on February
1 at 67.5. The position is closed out after five days. The prices on the four days after purchase
were 67.8, 68.1, 68, and 68.5. The initial margin is $3,500.
a. Calculate the current equity on each of the next four days.
b. Calculate the excess equity for these four days.
c. Calculate the final gain or loss for the week.
d. Recalculate (a), (b), and (c) assuming that the investor had been short over this same
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Consider Commodity Z, which has both exchange-traded futures and option contracts associated with it. As you look in today's paper, you find the following put and call prices for options that expire exactly six months from now:
Exercise Price
Put Price
Call Price
$ 40.00
$ 0.59
$ 8.73
$ 45.00
$ 1.93
$ -
$ 50.00
$ -
$ 2.47
a. Assuming that the futures price of a six-month contract on Commodity Z is Fo, 0.5 = $48, what must be the price of a put with an exercise price of $50 in order to avoid arbitrage across markets? Similarly, calculate the "no arbitrage" price of a call with an exercise price of $45. In both calculations, assume that the yield curve is flat and the annual risk-free rate is 6 percent.
b. What is the "no arbitrage" price differential that should exist between the put and call options having an exercise price of $40? Is this…
Chapter 9 Solutions
Advanced Accounting
Ch. 9.M - Prob. 1UTICh. 9.M - Prob. 2UTICh. 9.M - Prob. 3UTICh. 9.M - Prob. 4UTICh. 9.M - Prob. 5UTICh. 9.M - Prob. 1ECh. 9.M - Prob. 2ECh. 9.M - Prob. 3ECh. 9.M - Prob. 4.1ECh. 9.M - Prob. 4.2E
Ch. 9.M - Prob. 4.3ECh. 9.M - Prob. 4.4ECh. 9.M - Prob. 4.5ECh. 9.M - Prob. 4.6ECh. 9.M - Prob. 5ECh. 9.M - Prob. 6.1ECh. 9.M - Prob. 6.2ECh. 9.M - Prob. 7ECh. 9.M - Prob. M.1.1PCh. 9.M - Prob. M.1.2PCh. 9.M - Prob. M.2.1PCh. 9.M - Prob. M.2.2PCh. 9.M - Prob. M.3PCh. 9.M - Prob. M.4.3PCh. 9.M - Prob. M.4.4PCh. 9.M - Prob. M.4.5PCh. 9.M - Prob. M.4.6PCh. 9.M - Prob. M.5PCh. 9.M - Prob. M.6PCh. 9.M - Prob. M.7.1PCh. 9.M - Prob. M.7.2PCh. 9.M - Prob. M.7.3PCh. 9 - Prob. 1UTICh. 9 - Prob. 2UTICh. 9 - Prob. 3UTICh. 9 - Prob. 1.1ECh. 9 - Prob. 1.2ECh. 9 - Exercise 2 (LO 3) The accounting issues associated...Ch. 9 - Prob. 3.1ECh. 9 - Prob. 3.2ECh. 9 - Prob. 3.3ECh. 9 - Prob. 4.1ECh. 9 - Prob. 4.2E
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