Excellence in Business Communication (11th Edition)
11th Edition
ISBN: 9780133544176
Author: John V. Thill, Courtland L. Bovee
Publisher: PEARSON
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Chapter 11, Problem 13LOC
Summary Introduction
To Select:
The reason that it is important to fully understand the instructions and guidelines of using computer-based research tools.
Concept introduction:
Computer-based research tools are those such as search engine Google, web directory, database, which enable one to access data using various methods such as typing in key terms, copying data and many alternative ways.
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Mega Company believes the price of oil will increase in the coming months. Therefore, it decides to purchase call options on oil as a price-risk-hedging device to hedge the expected increase in prices on an anticipated purchase of oil.
On November 30, 20X1, Mega purchases call options for 14,000 barrels of oil at $30 per barrel at a premium of $2 per barrel with a March 1, 20X2, call date. The following is the pricing information for the term of the call:
Date
Spot Price
Futures Price (for March 1, 20X2, delivery)
November 30, 20X1
$ 30
$ 31
December 31, 20X1
31
32
March 1, 20X2
33
The information for the change in the fair value of the options follows:
Date
Time Value
Intrinsic Value
Total Value
November 30, 20X1
$ 28,000
$ –0–
$ 28,000
December 31, 20X1
6,000
14,000
20,000
March 1, 20X2
42,000
42,000
On March 1, 20X2, Mega sells the options at their value on that date and acquires 14,000 barrels of oil at the spot price. On June 1, 20X2, Mega sells the…
Tex Hardware sells many of its products overseas. The following are some selected transactions.
Tex sold electronic subassemblies to a firm in Denmark for 120,000 Danish kroner (Dkr) on June 6, when the exchange rate was Dkr 1 = $0.1750. Collection was made on July 3 when the rate was Dkr 1 = $0.1753.
On July 22, Tex sold copper fittings to a company in London for £35,000 with payment due on September 20. Also, on July 22, Tex entered into a 60-day forward contract to sell £35,000 at a forward rate of £1 = $1.630. The forward contract is not designated as a hedge. The spot rates follow:
July 22
£1 = $1.580
September 20
£1 = $1.612
Tex sold storage devices to a Canadian firm for C$71,000 (Canadian dollars) on October 11, with payment due on November 10. On October 11, Tex entered into a 30-day forward contract to sell Canadian dollars at a forward rate of C$1 = $0.730. The forward contract is not designated as a hedge. The spot rates were as follows:
October 11
C$1 =…
Chapter 11 Solutions
Excellence in Business Communication (11th Edition)
Ch. 11 - Prob. 1CACh. 11 - Prob. 2CACh. 11 - Prob. 1LOCCh. 11 - Prob. 2LOCCh. 11 - Prob. 3LOCCh. 11 - Prob. 4LOCCh. 11 - Prob. 5LOCCh. 11 - Prob. 6LOCCh. 11 - Prob. 7LOCCh. 11 - Prob. 8LOC
Ch. 11 - Prob. 9LOCCh. 11 - Prob. 10LOCCh. 11 - Prob. 11LOCCh. 11 - Prob. 12LOCCh. 11 - Prob. 13LOCCh. 11 - Prob. 14LOCCh. 11 - Prob. 15LOCCh. 11 - Prob. 16LOCCh. 11 - Prob. 17LOCCh. 11 - Prob. 18LOCCh. 11 - Prob. 19LOCCh. 11 - Prob. 20LOCCh. 11 - Prob. 11.1AYKCh. 11 - Prob. 11.2AYKCh. 11 - Prob. 11.3AYKCh. 11 - Prob. 11.1PYSMFACh. 11 - Prob. 11.4ECh. 11 - Prob. 11.5ECh. 11 - Prob. 11.6ECh. 11 - Prob. 11.7ECh. 11 - Prob. 11.8ECh. 11 - Prob. 11.9ECh. 11 - Prob. 11.10ECh. 11 - Prob. 11.11ECh. 11 - Prob. 11.12ECh. 11 - Prob. 11.13ECh. 11 - Prob. 11.14ECh. 11 - Prob. 11.15ECh. 11 - Prob. 11.16ECh. 11 - Prob. 11.17ECh. 11 - Prob. 11.18ECh. 11 - Prob. 11.19ECh. 11 - Prob. 1EYSCTPCh. 11 - Prob. 1SYCKO
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