TOPICS: INVESTMENTS/DERIVATIVES N sells approximately 100 000 bushels of corn each month. On January 1, 2019, N purchased an option to sell 100 000 bushels of corn on January 1, 2020, at a price of P 100 per bushel. The market price on January 1, 2019 is P 100 per bushel. N had to pay P 200 000 to purchase this corn put option, which it designated as a hedge against price decrease for its January 2020 sale of corn. If the price of thee corn on January 1 2020 is P 105 per bushel, N shall recognize a gain or loss on put option in 2020 at? If the price f the corn on January 1, 2020 is P 90 per bushel, N shall recognize gain or loss on put option in 2020 at?
TOPICS: INVESTMENTS/DERIVATIVES N sells approximately 100 000 bushels of corn each month. On January 1, 2019, N purchased an option to sell 100 000 bushels of corn on January 1, 2020, at a price of P 100 per bushel. The market price on January 1, 2019 is P 100 per bushel. N had to pay P 200 000 to purchase this corn put option, which it designated as a hedge against price decrease for its January 2020 sale of corn. If the price of thee corn on January 1 2020 is P 105 per bushel, N shall recognize a gain or loss on put option in 2020 at? If the price f the corn on January 1, 2020 is P 90 per bushel, N shall recognize gain or loss on put option in 2020 at?
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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TOPICS: INVESTMENTS/DERIVATIVES
N sells approximately 100 000 bushels of corn each
month. On January 1, 2019, N purchased an option to sell
100 000 bushels of corn on January 1, 2020, at a price of
P 100 per bushel. The market price on January 1, 2019 is
P 100 per bushel. N had to pay P 200 000 to purchase this
corn put option, which it designated as a hedge against
price decrease for its January 2020 sale of corn.
- If the price of thee corn on January 1 2020 is P
105 per bushel, N shall recognize a gain or loss
on put option in 2020 at? - If the price f the corn on January 1, 2020 is P 90
per bushel, N shall recognize gain or loss on put
option in 2020 at?
How would you solve these questions? Thanks!
Transcribed Image Text:N sells approximately 100 000 bushels of corn each
month. On January 1, 2019, N purchased an option to sell
100 000 bushels of corn on January 1, 2020, at a price of
P 100 per bushel. The market price on January 1, 2019 is
P 100 per bushel. N had to pay P 200 000 to purchase this
corn put option, which it designated as a hedge against
price decrease for its January 2020 sale of corn.
14. If the price of thee corn on January 1 2020 is P
105 per bushel, N shall recognize a gain or loss
on put option in 2020 at?
15. If the price f the corn on January 1, 2020 is P 90
per bushel, N shall recognize gain or loss on put
option in 2020 at?
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