On March 1 the price of a commodity is $1,000 and the December futures price is $1,015. On November 1 the price is $970 and the December futures price is $973. A user of the commodity entered into a December futures contract on March 1 to hedge the purchase of the commodity on November 1. It closed out its position on November 1. What is the effective purchase price (after taking account of hedging) paid by the company for the commodity? a. $1,014 b. $1,012 c. $1,016 d. $1,018
On March 1 the price of a commodity is $1,000 and the December futures price is $1,015. On November 1 the price is $970 and the December futures price is $973. A user of the commodity entered into a December futures contract on March 1 to hedge the purchase of the commodity on November 1. It closed out its position on November 1. What is the effective purchase price (after taking account of hedging) paid by the company for the commodity? a. $1,014 b. $1,012 c. $1,016 d. $1,018
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
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On March 1 the price of a commodity is $1,000 and the December futures price is $1,015. On November 1 the price is $970 and the December futures price is $973. A user of the commodity entered into a December futures contract on March 1 to hedge the purchase of the commodity on November 1. It closed out its position on November 1. What is the effective purchase price (after taking account of hedging) paid by the company for the commodity?
a.
$1,014
b.
$1,012
c.
$1,016
d.
$1,018
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