Homework Help is Here – Start Your Trial Now!
Business
Finance
8. Scott took a short position for 500 ounces of July gold at $653.25 per ounce. He did not close the position prior to the delivery date. In July, the spot price was $735.19. a. Did Scott make or lose money on this deal? b. Calculate the amount of his profit or loss. C. Assume the required initial margin was 5%. Calculate the initial margin. d. Calculate Scott's return as a percent.

8. Scott took a short position for 500 ounces of July gold at $653.25 per ounce. He did not close the position prior to the delivery date. In July, the spot price was $735.19. a. Did Scott make or lose money on this deal? b. Calculate the amount of his profit or loss. C. Assume the required initial margin was 5%. Calculate the initial margin. d. Calculate Scott's return as a percent.

Essentials Of Investments
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
See similar textbooks
icon
Related questions
Question
100%
286 Chapter 6 Investments 8. Scott took a short position for 500 ounces of July gold at $653.25 per ounce, He did not close the position prior to the delivery date. In July, the spot price was $735.19. a. Did Scott make or lose money on this deal? b. Calculate the amount of his profit or loss. C. Assume the required initial margin was 5%. Calculate the initial margin. d. Calculate Scott's return as a percent. Calculate Scott's rate of return (as a simple interest rate), assuming his position was open for 63 days. e. 9. Kenny took a position short 10,000 pounds of February copper at $2.53 a pound. By December, the price of February copper had risen to $2.85 a pound, and Kenny took a position long 10,000 pounds at this price. a. Did Kenny make or lose money on this deal? b. Calculate the amount of his profit or loss. Is it likely that Kenny got a margin call? On the basis of these contracts, what will Kenny need to do when February arrives? C. d. 10. Leila took a position long 15,000 gallons of June unleaded gasoline at $1.83 per gallon. By May, the price of June gasoline had risen to $1.92, and she took a position short 15,000 gallons at this price. a. Did Leila make or lose money on this deal? b. Calculate the amount of her profit or loss. Is it likely that Leila got a margin call? On the basis of these contracts, what will Leila need to do when June arrives. C. d. 11. Suppose that I am long September orange juice and I decide I want to close my position. Describe what I need to do to accomplish this. C. Options Terminology 12. Tracy believes that Zarofire Systems stock will drop in value. Would she be more likely to buy a put or a call on this stock? 13. Dom thinks that Triloquant Logistics Corp.'s stock will rise in value. Would he be more likely to buy a put or a call? 14. An investment manager has a portfolio that includes a large investment in Ganargua Hydro Corp. While she believes the company's prospects are excellent, she is concerned about the risk to the portfolio if something she is not expecting happens and drives down the stock price. Would she be likely to buy puts or calls on the company's stock to protect against this risk?
Transcribed Image Text:286 Chapter 6 Investments 8. Scott took a short position for 500 ounces of July gold at $653.25 per ounce, He did not close the position prior to the delivery date. In July, the spot price was $735.19. a. Did Scott make or lose money on this deal? b. Calculate the amount of his profit or loss. C. Assume the required initial margin was 5%. Calculate the initial margin. d. Calculate Scott's return as a percent. Calculate Scott's rate of return (as a simple interest rate), assuming his position was open for 63 days. e. 9. Kenny took a position short 10,000 pounds of February copper at $2.53 a pound. By December, the price of February copper had risen to $2.85 a pound, and Kenny took a position long 10,000 pounds at this price. a. Did Kenny make or lose money on this deal? b. Calculate the amount of his profit or loss. Is it likely that Kenny got a margin call? On the basis of these contracts, what will Kenny need to do when February arrives? C. d. 10. Leila took a position long 15,000 gallons of June unleaded gasoline at $1.83 per gallon. By May, the price of June gasoline had risen to $1.92, and she took a position short 15,000 gallons at this price. a. Did Leila make or lose money on this deal? b. Calculate the amount of her profit or loss. Is it likely that Leila got a margin call? On the basis of these contracts, what will Leila need to do when June arrives. C. d. 11. Suppose that I am long September orange juice and I decide I want to close my position. Describe what I need to do to accomplish this. C. Options Terminology 12. Tracy believes that Zarofire Systems stock will drop in value. Would she be more likely to buy a put or a call on this stock? 13. Dom thinks that Triloquant Logistics Corp.'s stock will rise in value. Would he be more likely to buy a put or a call? 14. An investment manager has a portfolio that includes a large investment in Ganargua Hydro Corp. While she believes the company's prospects are excellent, she is concerned about the risk to the portfolio if something she is not expecting happens and drives down the stock price. Would she be likely to buy puts or calls on the company's stock to protect against this risk?
Expert Solution
steps

Step by step

Solved in 2 steps

SEE SOLUTIONCheck out a sample Q&A here
Blurred answer
Knowledge Booster
Forwards and Futures
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.
Similar questions
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
SEE MORE TEXTBOOKS