With a dry summer forecast, you expect that the soybean harvest will be smaller than normal and that soybean prices will rise. To speculate on this expectation, you buy 10 soybean futures contracts with a September maturity. The soybean futures price when you initiate the long position is $14.00 per bushel. By August the soybean futures price has risen to $16.00 per bushel. You execute an offset trade. What is your cumulative profit on the trades?
Q: Matheson Electronics has just developed a new electronic device that it believes will have broad…
A: Net Present Value: It represents the profit generated by the firm in absolute terms after…
Q: A man wants to set up a 529 college savings account for his granddaughter. How much would he need to…
A: Annual Deposit is that amount which is required to deposit by investor every year for receiving the…
Q: What is the present value of $4,000 that you expect to receive in two years assuming a discount rate…
A: To calculate the present value we will use the below formula Present value = FV/(1+r)t Where FV -…
Q: A project has an initial cost of $50,000, expected net cash inflows of $14,000 per year for 9 years,…
A: Profitability Index is a capital budgeting techniques. it shown the relationship between the PV of…
Q: Answer and draw the cashflow diagram A steam boiler is purchased on the basis of guaranteed…
A: Formula:- Present value of annuity. PV = A * 1 - (1+r)-nr where , PV = present value of annuity A =…
Q: EE printing is in the evaluation process for the acquisition of a new computer system. The total…
A: Payback period is a financial metric used to evaluate the length of time it takes to recoup the…
Q: Kaitlyn wants to accumulate $35,000 in a fund with payments of $1,800 made at the end of every…
A: The future value of annuity is the accumulated value of the deposits along with the interest earned…
Q: Give typing answer with explanation and conclusion Compute the future value of $1,000 compounded…
A: Future value refers to an amount of a current asset at some future date affected by interest arte,…
Q: Tuition of $1219 will be due when the spring term begins in 3 months. What amount should a student…
A: Information Provided: Future value = $1219 Period = 3 months or 0.25 year Interest rate = 6.47%
Q: You are told that the one-year spot rate is 6.5%. Use a spreadsheet to find the current long-term…
A: Here,
Q: The cash flows for 4 investments with economic lives of 4,5,5 and 6 years respectively are as…
A: To know which investment is best , we will use one of the main techniques of Capital Budgeting which…
Q: Laura has self-employment income of $87,500 for the year. How much is her self-employment tax?…
A: For a taxpayer, the income is known. The self employment taxes need to be calculated.
Q: As the chief financial officer of Adirondack Designs, you have the following information: Next…
A: Times Interest Earned Ratio: This ratio represents a measure of the firm's ability to pay off its…
Q: Jim is a new financial counselor (first week on the job) working on AFC® credentials and last week…
A: AFCPE® Standard of Practice Twenty-Two (SP-22) is a part of the Standards of Practice established by…
Q: Given the NYSE advancing/declining (Num) and volume (Vol) Advancing Declining Day…
A: The AD Volume ratio is a technical indicator used in stock market analysis to measure market…
Q: oyall Company purchased a delivery truck at $25,000 plus 8% sales taxes. Royall paid $3,000 in cash…
A: Explanation : Monthly payment of Loan is that which is also called EMI. It's Includes the Interest…
Q: A BBB-rated corporate bond has a yield to maturity of 8.2%. A U.S. Treasury security has a yield to…
A: A treasury bill is a kind of debt security issued by the government and private companies for…
Q: You want to buy a $248,000 home. You plan to pay 5% as a down payment, and take out a 30 year loan…
A: Loan: It represents the amount borrowed by the borrower for the purpose of purchasing assets like…
Q: 7 Assume the following information: Quoted Price Value of Canadian dollar in British pounds Value of…
A: Steps to be followed: Buy Canadian dollars at £0.55/C$, we get C$1,818,181.82 (£1,000,000/0.55)…
Q: Laureen purchased 1,000 shares of Apple stock for $80 per share with an initial margin requirement…
A: Purchased Price = $80 initial margin requirement = 65% maintenance margin = 40% New stock price =…
Q: it say 1.33 is incorrect
A:
Q: A credit union is offering a $425,000 30 year loan with an annual rate of 4.1% with 1.4 points or…
A: The number of months refers to the period to be taken to recover the initial investment made by the…
Q: We can now use the following formula to find the present value of the account where the annuity…
A: Information Provided: Monthly annuity payment = $400 Table factor (Ordinary Annuity) = 21.67568…
Q: Gary wants to save $555,000 in 8 ears, he currently has $225,000 in an investment. Due to financial…
A: We will calculate interest rate using RATE function in excel for accurate results as nothing is…
Q: The Global Advertising Company has a tax rate of 30%. The company can raise debt at a 12% interest…
A: Cost of Equity = [(Dividend x (1 - Flotation Cost)) / (Current Stock Price x (1 - Flotation Cost))]…
Q: Landon Lowman, star quarterback of the university football team, is thinking about forgoing his last…
A: According to the concept of time value of money , the value of a present sum of money is not the…
Q: vehicle purchased for $22,400 depreciates at a constant annual rate of 7%. Determine the approximate…
A: Depreciation refers to the decrease in value of an asset over time due to wear and tear,…
Q: Required Homework Questions Recently, Cash Flows from Investing Activities have become large…
A: Cash flows from investing activities represent the cash inflows and outflows that result from a…
Q: Question The Wilshire 5000 index includes the shares of 5,000 U.S.-listed equities. If you measure…
A: Risk arises due to variations in possible expected returns or is known as variability of returns.…
Q: Staton-Smith Software is a new start-up company and will not pay dividends for the first five yea of…
A: Here, Annual Cash Dividend paid at the end of six years (D6) is $3.50 Constant Growth Rate of…
Q: As the required rate of return on an asset decreases 1. 11. III. Asset prices increase because the…
A: Step 1 An asset's anticipated rate of return is equal to the market interest rate; Actual Value is…
Q: On May 3, 2020, Leven Corporation negotiated a short-term loan of $660,000. The loan is due October…
A: Ordinary interest is a type of interest that is calculated based on the original principal amount of…
Q: A municipal bond has face value of $500,000, mature in 8 years and 3 months from now, and the coupon…
A: The coupon rate and the yield to maturity (YTM) are both measures of the return that an investor can…
Q: We buy a convertible bond for $700 when the underlying stock price is $30 and the straight value of…
A: The convertible bond is type of hybrid instrument which combine the feature of bond and stocks…
Q: Stock W has an expected return of .12 with a standard deviation of .08. If returns are normally…
A: The connection between risk and return is a core of the investment process. According to the theory,…
Q: You would like to have $550,000 when you retire in 40 years. How much should you invest each quarter…
A: compound = quarterly = 4 Future value = fv = $550,000 Time = 40 * 4 = 160 quarters Interest rate = r…
Q: ABC., Inc., is currently operating at only 75 percent of fixed asset capacity. Current sales are…
A: Revenue: It refers to the money received by the business from the sale of its products or services.…
Q: 1a)List and explain the five finance functions in an organisation b)Why should it worry when you…
A: Introduction (A) Finance is an integral part of any organization, since it is necessary to ensure…
Q: Elizabeth purchased an annuity in 2010. She paid $75,000 for the annuity. She is not going to…
A: To determine the tax treatment of Elizabeth's annuity payments, we need to calculate the exclusion…
Q: Supreme Depths plc, an oil exploration company, issued a 10 year 0% Bond valued at $3 million with a…
A: Bond: It represents a financial security that is issued to raise capital in the form of debt. The…
Q: Give typing answer with explanation and conclusion What is the change in the NPV of a one-year…
A: Explanation : NPV is also known as Net Present Value. It is a Capital Budgeting techniques which…
Q: Calculate the payment and rate adjustments for the following scenario. 5/1 Interest Only ARM…
A: To calculate the payment on this mortgage, we need to first determine the monthly interest rate by…
Q: What are the prices of a call option and a put option with the following characteristics? Stock…
A: An option is a type of financial instrument that is based on the value of underlying securities,…
Q: What nominal rate of interest compounded semi-annually can be used instead of 10 % comp. monthly…
A: We need to determine the effective annual rate that would equal the 2 compounding methods. The…
Q: NOT correct and its taken two of my questions now
A: Better credit card is one that results in lower interest charges.
Q: A firm currently depreciates €100 per year on its fixed assets, and will continue to do so forever.…
A: This question is asking for the present value of an infinite stream of tax shields resulting from…
Q: Suppose that there are many stocks in the security market and that the characteristics of stocks A…
A: Step 1 The risk-free rate is typically thought of as being equal to the interest earned on a…
Q: What is the yield to call of a bond that is selling at $1,200, paying 12% interest, semi-annually,…
A: The characteristics of a callable bond are known. The yield to call (YTC) is to be determined. YTC…
Q: What is the percentage margin of a margin call if an investor has purchased $10,000 worth of…
A: A margin money under margin call is an important concept in capital market or stock market trading.…
Q: The tax bracket and holdings of your client are as follows: Federal tax bracket = 33%…
A: Data given: Investment Annual Income ($) June 30,Last Year's Purchase Price ($) June 30, This…
With a dry summer
Step by step
Solved in 2 steps
- A farm that produces corn is looking to hedge their exposure to price fluctuations in the future. It is now May 15th and they expect their crop to be ready for harvest September 30th. You have gathered the following information: Bushels of corn they expect to produce 44,000 May 15th price per bushel $3.08 Sept 30 futures contract per bushel $3.22 Actual market price Sept 30 $3.37 Required (round to the nearest dollar): Calculate the gain or loss on the futures contract and net proceeds on the sale of the corn. Net gain or loss on future $Answer Sell the corn $Answer Net $AnswerIt is September 10 and Mr. James is making final estimates of this year’s wheat crop. His production is turningout to be much better than anticipated. This causes concern because if his production is better than expected, otherfarmers must be experiencing the same situation. The current spot price is $2.25 per bushel, and the Octoberwheat futures (5,000 bushels per contract) price is $2.52 per bushel. At the current spot price, Mr James wouldjust break even with his anticipated 60,000 bushels. His wheat will not be ready until October.a) What can Mr James do to ensure his profitability? Is this a long or a short hedge? Why? b) What is the essential feature of a forward contract that makes a futures contract a type of forward contract?as a soybean buyer, you are concerned about soy prices. Currently, they are at $60 per bushel .Therefore, you enter into the appropriate futures contract at the current spot price. What is your profit or loss, if six months later, soybean is selling at the spot market for 51 bushell? why?
- Suppose a farmer is expecting that her crop of oranges will be ready for harvest and sale as 150,000 pounds of orange juice in 3 months time. Suppose each orange juice futures contract is for 15,000 pounds of orange juice, and the current futures price is F0 = 118.65 cents-per-pound. The volatility, i.e. the standard deviation, of the prices of orange juice and grape fruit juice is 20% and 25%, respectively, and the correlation coefficient is 0.70. What is the approximate number of contracts she should purchase to minimize the variance of her payoff?You are a futures trader on Lean Hog at Kantar, New York. You have the following information on Lean Hog. The standard deviation of monthly changes in the spot price of Lean Hog Futures is (in cents per pound) 5. The standard deviation of monthly changes in the futures price of Lean Hog Futures the closest contract is 8. The correlation between the futures price changes and the spot price changes is 0.8. It is now December 17, 2019. Your client, a pork producer, is committed to purchasing 400,000 pounds of lean hog on January 15. The producer wants to use February Lean Hog futures contracts to hedge its risk. Each contract is for the delivery of 40,000 pounds of cattle. a. What is the optimal hedge ratio? (sample answer: 0.45 or 45%) b. Should the pork producer take a long or short hedge? (sample answer: short or long) c. How many contracts of lean hog futures does your client need to take to hedge the risk? (sample answer: 6 contracts)Assume that the price of December 2021 corn futures is $4.65/bushel in February and $4.50 in October. If spot cash price in October is $4.55, what is the farmer's total revenue? Assume he entered into 20 contracts. Each corn contract is 5000 bushels.
- You are the buyer for a cereal company and you must buy 80,000 bushels of corn next month. The futures contracts on corn are based on 5,000 bushels and are currently quoted at 415′0 cents per bushel for delivery next month. If you want to hedge your cost, you should _____ contracts at a cost of _____ per contract.Suppose that the price of corn is risky, with a beta of .5. The monthly storage cost is $.03 per bushel, and the current spot price is $5.50, with an expected spot price in three months of $5.88. If the expected rate of return on the market is 0.9% per month, with a risk-free rate of 0.5% per month, would you store corn for three months?The spot price for smoked salmon is $5,000 per ton and its six-month futures price is $4,800. The monthly interest rate is .0025 (.25%). What is the average monthly net convenience yield on smoked salmon for the next six months? If you are a manager of Bread&Circusand need 10 tons of smoked salmon in six months. How can you avoid the risk in the price of smoked salmon over the next six months using futures? Suppose that your net convenience yield for smoked salmon is 1.2%. How does this change your hedging strategy
- Suppose that March oil futures have the price of $65/barrel, and the size of the contract is 1,000 barrels. When the contract matures in March, what will be the profit of a single long futures contract if the spot price is $68.50/barrel? Only typed Answer and give Answer fastThe spot price for smoked salmon is $5,000 per ton and its six-month futures price is $4,800. The monthly interest rate is .0025 (.25%). What is the average monthly net convenience yield on smoked salmon for the next six months? 2. If you are a manager of Bread&Circus and need 10 tons of smoked salmon in six months. How can you avoid the risk in the price of smoked salmon over the next six months using futures? 3. Suppose that your net convenience yield for smoked salmon is 1.2%. How does this change your hedging strategThe standard deviation of monthly changes in the spot price of live cattle is (in cents per pound) 1.5. The standard deviation of monthly changes in the futures price of live cattle for the closest contract is 2. The correlation between the futures price changes and the spot price changes is 0.5. It is now October 15. A beef producer is committed to purchasing 500000 pounds of live cattle on November 15. The producer wants to use the December live-cattle futures contracts to hedge its risk. Each contract is for the delivery of 40000 pounds of cattle. What strategy should the beef producer follow?