4. On April, a trader sold 10 July sugar futures and purchased 10 September sugar futures, with prices of $5350 per ton and $5400 per ton respectively. On May, the trader hedged and closed all the positions of the contracts, with the closing prices of July and September contracts at $5,390 per ton and $5,480 per ton respectively. The trading unit of sugar futures is 10 tons per contract, excluding commissions and other expenses. The arbitrage trade have (). A. Loss of $2000 B. Profit of $2000 C. Loss of $4000 D. Profit of $4000

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
icon
Related questions
Question
Give typing answer with explanation and conclusion
4. On April, a trader sold 10 July sugar futures and purchased 10 September
sugar futures, with prices of $5350 per ton and $5400 per ton respectively. On
May, the trader hedged and closed all the positions of the contracts, with the
closing prices of July and September contracts at $5,390 per ton and $5,480
per ton respectively. The trading unit of sugar futures is 10 tons per contract,
excluding commissions and other expenses. The arbitrage trade have().
A. Loss of $2000
B. Profit of $2000
C. Loss of $4000
D. Profit of $4000
at an initial margin of 10% and
Transcribed Image Text:4. On April, a trader sold 10 July sugar futures and purchased 10 September sugar futures, with prices of $5350 per ton and $5400 per ton respectively. On May, the trader hedged and closed all the positions of the contracts, with the closing prices of July and September contracts at $5,390 per ton and $5,480 per ton respectively. The trading unit of sugar futures is 10 tons per contract, excluding commissions and other expenses. The arbitrage trade have(). A. Loss of $2000 B. Profit of $2000 C. Loss of $4000 D. Profit of $4000 at an initial margin of 10% and
Expert Solution
steps

Step by step

Solved in 3 steps with 3 images

Blurred answer
Knowledge Booster
Commodity Price Risk
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.
Recommended textbooks for you
Essentials Of Investments
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
FUNDAMENTALS OF CORPORATE FINANCE
FUNDAMENTALS OF CORPORATE FINANCE
Finance
ISBN:
9781260013962
Author:
BREALEY
Publisher:
RENT MCG
Financial Management: Theory & Practice
Financial Management: Theory & Practice
Finance
ISBN:
9781337909730
Author:
Brigham
Publisher:
Cengage
Foundations Of Finance
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education