Answered: at RM3450 per MT. Each FCPO contract is…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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J-Rata Corp can supply 50,000 metric tons (MT) of crude palm oil (CPO) to L-Brothers on 15^th March 2021. The current CPO price is RM3400 per MT. It is expected that the CPO could be trading at RM2700 per MT on 15^th March 2021. The FCPO (CPO Futures) is currently trading at RM3450 per MT. Each FCPO contract is 25 MTs. If the FCPO is trading at RM2100 per MT on 15^th March 2021, calculate the net sales revenue of J-Rata Corp in this supply transaction if it decides to hedge by using FCPO contracts.

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