You are the fnance manager of Oman Flour Mills. Oman flour mills imports 600 tons off wheet G Australia per month. The mill uses the wheat for production of bread. On 1" April spot price e Australian wheat is 1200 $ per ton. The finance manager is worried that by end of April spot price of Australian wheat will rise to 2000 $ per ton. To protect the company against the sharp rise in input cost of wheat, on 1" April the finance manager purchased 600 wheat futures contracts for end of April expiry (30 April expiry) from Chicago Commodities Exchange at price of 1250 per ton. The finance manager feels that by end of April price of Chicago wheat futures will rise to 2050 per ton. The finance manager is interested in bedsine and not speculation. The problem is that Chicago wheat is not suitable for Oman Flour Mills for production of bread Fven if Oman Flour Mills takes delivery of the wheat from Chicago Commodities Exchange, it will not be able to use it. Why did the finance manager book Chicago wheat futures. Explain with calculations

You are the fnance manager of Oman Flour Mills. Oman flour mills imports 600 tons off wheet G Australia per month. The mill uses the wheat for production of bread. On 1" April spot price e Australian wheat is 1200 $ per ton. The finance manager is worried that by end of April spot price of Australian wheat will rise to 2000 $ per ton. To protect the company against the sharp rise in input cost of wheat, on 1" April the finance manager purchased 600 wheat futures contracts for end of April expiry (30 April expiry) from Chicago Commodities Exchange at price of 1250 per ton. The finance manager feels that by end of April price of Chicago wheat futures will rise to 2050 per ton. The finance manager is interested in bedsine and not speculation. The problem is that Chicago wheat is not suitable for Oman Flour Mills for production of bread Fven if Oman Flour Mills takes delivery of the wheat from Chicago Commodities Exchange, it will not be able to use it. Why did the finance manager book Chicago wheat futures. Explain with calculations

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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