Phoenix Motors wants to lock in the cost of 10,000 ounces of platinum to be used in next quarter's production of catalytic converters. It buys 3-month futures contracts for 10,000 ounces at a price of $950 per ounce. a. Suppose the spot price of platinum falls to $825 in 3 months' time. Does Phoenix have a profit or loss on the futures contract? b-1. Has it locked in the cost of purchasing the platinum it needs? b-2. What is the total lock-in cost? c. If the spot price of platinum increases to $1,025 after 3 months, does Phoenix have a profit or loss on the futures contract? d. What is the total lock-in cost? Phoenix Motors has a on the futures contract equal to a. b-1. Has it locked in the cost of purchasing the platinum it needs? b-2. Total cost Phoenix Motors has a on the futures contract equal to с. d. Total cost

Phoenix Motors wants to lock in the cost of 10,000 ounces of platinum to be used in next quarter's production of catalytic converters. It buys 3-month futures contracts for 10,000 ounces at a price of $950 per ounce. a. Suppose the spot price of platinum falls to $825 in 3 months' time. Does Phoenix have a profit or loss on the futures contract? b-1. Has it locked in the cost of purchasing the platinum it needs? b-2. What is the total lock-in cost? c. If the spot price of platinum increases to $1,025 after 3 months, does Phoenix have a profit or loss on the futures contract? d. What is the total lock-in cost? Phoenix Motors has a on the futures contract equal to a. b-1. Has it locked in the cost of purchasing the platinum it needs? b-2. Total cost Phoenix Motors has a on the futures contract equal to с. d. Total cost

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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Question

Phoenix Motors wants to lock in the cost of 10,000 ounces of platinum to be used in next quarter's production of catalytic converters. It
buys 3-month futures contracts for 10,000 ounces at a price of $950 per ounce.
a. Suppose the spot price of platinum falls to $825 in 3 months' time. Does Phoenix have a profit or loss on the futures contract?
b-1. Has it locked in the cost of purchasing the platinum it needs?
b-2. What is the total lock-in cost?
c. If the spot price of platinum increases to $1,025 after 3 months, does Phoenix have a profit or loss on the futures contract?
d. What is the total lock-in cost?
a.
Phoenix Motors has a
on the futures contract equal to
b-1. Has it locked in the cost of purchasing the platinum it needs?
b-2.
Total cost
c.
Phoenix Motors has a
on the futures contract equal to
d.
Total cost

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