uestion 2: Suppose you are Chief Financial Officer at Beazley Confectionery, Inc, and you purchase a large quantity of cocoa each month. You are concerned about the price of cocoa one month from now. You want to guarantee that you will not pay more than $0.80 per pound for forty-five thousand pounds. You do not want to pay for insurance, but you do not want to lock in a price of $0.80 per pound for forty- five thousand pounds. a. Show the economies of a futures transaction for a spot prices on delivery date of $0.70, $0.80, $0.95 b. What is the variability of Beazley's total outlays under the future contract? c. If at the time of delivery, cocoa is $0.70 per pound, should you have foregone entering into the futures contract? Why or why not? Please write the formula clearly and explain in detail. I need to review for my next exam. Thank you so much in advanced!
Question 2: Suppose you are Chief Financial Officer at Beazley Confectionery, Inc, and you purchase a large quantity of cocoa each month. You are concerned about the price of cocoa one month from now. You want to guarantee that you will not pay more than $0.80 per pound for forty-five thousand pounds. You do not want to pay for insurance, but you do not want to lock in a price of $0.80 per pound for forty- five thousand pounds.
a. Show the economies of a futures transaction for a spot prices on delivery date of $0.70, $0.80, $0.95
b. What is the variability of Beazley's total outlays under the future contract?
c. If at the time of delivery, cocoa is $0.70 per pound, should you have foregone entering into the futures contract? Why or why not?
Please write the formula clearly and explain in detail. I need to review for my next exam. Thank you so much in advanced!
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