On October 31, Year 1, Trailer Homes Company (THC) determines that it will need to buy 175,000 lbs, of aluminum sidingpanels on April 30, Year 2. In order to hedge the risk that the price of the aluminum siding panels will increase in six monthsthe Treasurer simultaneously takes a long position in an aluminum forward contract, where the company agrees to purchase175,000 lbs, of aluminum for $3.756/lb. on April 30, Year 2. The prices for the aluminum siding panels and the aluminumforward are as follows.Aluminum Siding /lb. Aluminum Forward/Ib.October 31, Year 1$5.390$3,756January 31, Year 1$5.552$3. 881$5.768$3.925April 30, Year 2inanols on Assuming that THC has a fiscal reporting year-end of January 31, what is the net cash paid for the aluminum siding paneis onApril 30 after the aluminum forward contract is also settled on that date?O S322,525O S979,825O $1,001,700O $1,009,400

With the strike price (X) and the market spot price (S) at forward date when trading take place. Net…

Answered: On October 31, Year 1, Trailer Homes…

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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